In our ongoing efforts to provide you with broader communications
and industry information, we are pleased to issue this Industry Bulletin,
which reports on the December 27, 2011 announcement by the Chinese
Ministry of Commerce (the "Ministry") on the first round of
allocations of rare-earth export quotas for 2012. The announcement stated generally that, "In order to protect international demand
and maintain the basic stability
of rare-earth supplies, the total export quotas
for 2012 and 2011 will be
basically the same."
The Ministry's announcement disclosed that the first round of
quota allocations (totaling 24,904 tonnes of
rare earth oxides) will represent 80% of the quota allocations for 2012;
which implies that the total for the coming year will be 31,130 tonnes of rare earths, slightly higher than for 2011.
The following table summarized the annual export quotas, as they have
been declared over the past eight years, showing that annual quotas have
stabilized over the past two yearsreversing a six year trend of reduced annual quotas going back to 2005.
Export quotas for the Chinese
rare-earth industry
Source: Chinese Ministry of Commerce,
Metal-Pages and IMCOA
|
|
2005
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
TOTAL
(Tonnes)
|
65,609
|
61,821
|
59,643
|
56,939
|
50,145
|
30,258
|
30,246
|
31,130
|
Interestingly, this year's announcement differs from previous
years by providing a full year target quota rather than six month quotas
and by defining separate quota allocations for light rare earth elements
(LREs) and medium / heavy rare earth elements (MREs/HREs), evidently in
an effort to better balance the export market.
First set of allocations of Chinese
rare-earth export quotas, for 2012
|
Allocation
Type
|
Allocation
(tonnes)
|
LRE
|
MRE/HRE
|
Total
|
Confirmed
|
9,095
|
1,451
|
10,546
|
Provisional
|
12,605
|
1,753
|
14,358
|
Total
|
21,700
|
3,204
|
24,904
|
The Ministry also introduced a new approach to allocating the
quotas designed to encourage improved environmental
practice amongst producers.
Some of the annual
allocations are being made only
on a provisional basis subject
to meeting new pollution control regulations, by July 2012. Companies
that fail to meet the new requirements will apparently have their quotas
re-allocated to other companies. It is currently expected that sometime
during the summer of 2012, details of which companies will be allocated
the remaining 20 per cent of quotas will be released.
Reaction to the announcement from industry watchers has been
mixed. Gareth Hatch, co-founder of Technology Metals Research, notes,"The industry is well aware that the
significant price increases for individual rare earth products were key in eroding demand over 2011, with lanthanum- and
cerium-based products seeing the largest declines in demand. It is
possible that the authorities in China see prices falling much further
than the recent decreases that we've seen, to such low levels that the
demand for exports will return to 2009 / 2010 levels, which would
"fill out" the 2012 quota allocations." Gareth Hatch`s detailed
commentary can be found at http://www.techmetalsresearch.com/2011/12/the-first-round-of-chinese-rare-earth-export-quota-allocations-for-2012/.
Other analysts and writers
are divided on the reasons
behind the rise in
the export quota, with some
suggesting China was bowing to pressure from trading partners, and others suggesting it was a response to China's domestic economic slowdown.China's control over global rare-earth supply, and its actions over the past
six years in reducing
its export quotas while
global REE demand grew,
has caused a surge in
prices over the past two years.
Pierre Neatby, Avalon's
Vice President, Sales and Marketing notes that, "Thirty-thousand
tonnes per annum is
the number the Chinese
have been saying is a
good number for the next
few years. The lower
quota in the first half may
in part be due to the Chinese
wanting to stop the price
slide. While it can be
expected that these export quotas could likely lead to continued near-term pricing pressures
on rare earths, even at much lower
rare earth prices, we are confident that the
longer-term outlook
for the overall industry
remains bright, especially for the more scarce
heavy rare earths."