Industry Bulletin: China Reduces Rare Earth Export Quotas Again
December 29, 2010
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 Chinese Government's announcement yesterday (Dec. 28) that it will again be reducing its export quotas during the first half of 2011. The news has received widespread media coverage and prompted heavy trading activity in Avalon's shares over the past two days on the NYSE Amex.
Earlier this year, China, representing 97 percent of the global rare earth element production, reduced export quotas by 72% (ref: Avalon Industry Bulletin of July 9, 2010). Yesterday, China's Ministry of Commerce announced that it would essentially be reducing its export quotas by a further 35 percent in the first half of 2011, relative to the same period the year before. The authorities have allocated 14,508 tonnes of rare earth export quotas to 32 different companies in China. For the same period last year, the allocation was 22,282 tonnes.. These cuts to exports threaten to extend a global shortage of rare earth elements needed for smart-phones, hybrid vehicles, energy-efficient lighting and renewable-energy technologies.
Some earlier news reports have stated that the reduction was in the order of 10 - 11 percent, but this was based on an incorrect comparison against only Chinese-owned companies in China. The appropriate comparison should have been against the total of the 1H2010 allocations to the Chinese trading companies (16, 304t) plus the foreign-owned companies (5,978t).
The Chinese government tends to address its export controls around strategic resources semi-annually.
Chinese officials have indicated that their government departments are still reviewing the full-year rare earth export quotas for 2011, and are trying to calm markets, cautioning against inferring the full year figure from the first half quota. However, these cutbacks are consistent with China's policy trend over the past several years to overhaul a mining sector blamed for causing widespread environmental damage and control output in order to ensure adequate supplies for domestic rare earth consumers. This latest move has raised concerns with US Trade representatives and will likely exacerbate tensions with Japan and South Korea and the European Union.
The Chinese Ministry of Finance said earlier this month that it will also raise export taxes for some rare earth elements to 25 percent next year. For example, this is an increase to the 15 percent temporary export tax on neodymium, used in batteries for hybrid vehicles. These policy announcements may very well apply further upward pressure on individual rare earth element prices.
The U.S. Department of Energy issued its 171-page Critical Materials Strategy early this month (Dec 10th). The report provides an excellent assessment of the delicate supply-demand balance for a broad number of critical or strategic metals, the current and future applications and possible US-based and prospective ex-China resource and processing solutions. The report specifically noted the very high importance and greatest supply risk for the heavy rare earths (dysprosium, terbium, yttrium, europium) and neodymium, a critical light rare earth needed for permanent magnets. The DOE report can be found by clicking on http://blog.energy.gov/blog/2010/12/15/department-energy-releases-new-critical-materials-strategy
Avalon's heavy rare earth rich Nechalacho deposit at Thor Lake, NWT, Canada is one of the few advanced rare earth development projects in the world in a position to provide a supply of scarce heavy rare earths such as dysprosium and terbium to the market outside China.
If you have any comments or questions on this article or the rare earths generally, please do not hesitate to contact the company directly at firstname.lastname@example.org. Follow us on Twitter at http://twitter.com/avalonraremetal, join our FaceBook page at http://www.facebook.com/pages/Avalon-Rare-Metals-Inc/224623996080?ref=ts or subscribe to our YouTube video feeds at http://www.youtube.com/user/AvalonRareMetals.
ABOUT AVALON RARE METALS INC.
Avalon Rare Metals Inc. (TSX & NYSE Amex: AVL) is a mineral exploration and development company focused on rare metals deposits in Canada. Its flagship project, the 100%-owned Nechalacho Deposit, Thor Lake, NWT, is emerging as one of the largest undeveloped rare earth elements resources in the world. Its exceptional enrichment in the more valuable 'heavy' rare earth elements, which are key to enabling advances in green energy technology and other growing high-tech applications, is one of the few potential sources of these critical elements outside of China, currently the source of 95% of world supply. Avalon is well funded, has no debt and its work programs are progressing steadily. Social responsibility and environmental stewardship are corporate cornerstones. Avalon's performance on community engagement in the north earned it the 2010 PDAC Environmental and Social Responsibility Award.