China losing leverage on Japan as rare earth metal exports decline

[WS-10 Engine]

Where did you found Indian's cheering or is it your catch phrase? .

These steps which Japan is taking are the beginning of tectonic shift in Japanese trade policy.

Japanese economy has been in a deflation debt binge since their housing and stock bubble burst in 1990.

It's contribution to global growth has been minimal.

 

[SpArK]

China's largest rare earth supplier halts production
​

PRC suffers slump as global demand slows

Posted in Business, 26th October 2012 05:15 GMT


China’s stranglehold on the world’s rare earth supply appears to be relaxing, with its largest producer of light rare earths forced to halt some of its operations for a month in an attempt to stop prices slipping further.

The Inner Mongolia Baotou Steel Rare Earth Hi-Tech Company is suspending its smelting and separation plants from Tuesday, and will stop providing raw materials for other companies' smelting and separation operations, according to a post on the Shanghai Stock Exchange seen by Global Times.

Prices for the rare earths, which are essential to the manufacture of a range of hi-tech kit, have apparently tumbled by around 50 per cent since the start of the year. While Japan is set to import around 10,000 tons in 2012, that's the lowest level for ten years, according to Kyodo news.

It appears that reduced demand on the back of a global economic slowdown is to blame for the price drop, rather than competition from mining operations in countries beyond China, which has more rare earths than anyone else and has been buying up offshore sources.

It’s therefore no surprise then that the Inner Mongolian-based Baotou this week revealed net profits of 120 million yuan (£11.9m), a 90 per cent drop from the same time last year.

The World Trade Organisation agreed in July to investigate claims by the US, EU and Japan that China is unfairly strangling rare earth exports to drive up prices and favour its domestic manufacturing industry.

However, China has always pleaded that any stockpiling or export restrictions were necessary because although it produces over 90 per cent of the world’s rare earths, it has barely a third of global reserves.

It has also argued that mining operations need to be reformed and scaled back in order to prevent further environmental damage, claiming that the recovery rate for rare earths is less than 50 per cent.

It should also be mentioned that China 'hosts' a thriving black market in rare earths.

Chen Zhanheng, director of the academic department of the Chinese Society of Rare Earths, told the Global Times that these producers, which sell cut price to foreign buyers, now produce around a third as much as the legitimate suppliers.

WTO investigation aside there are already signs that other nations are taking the initiative, spurred by the desire to reduce their dependence on China.

California's Mountain Pass mine is open again while Vietnam is accelerating its mining plans, backed by Japan. ®


China's largest rare earth supplier halts production ? The Register

 

[Anonymous user]

Is it?

Place the proposition in front of Mamta Banerjee.. she wants to think 1000 times to allowing a nuclear plant or a car factory.

Frankly, despite all your optimism.... rare earth projects are unlikely to make much headway in India, and when they do .... people are going to insist environmental standards tougher than western world. (you might consider it a fallacy, but it is so!).

If you read my post the foray into Rare Earth was mainly to spearhead a technological drive, the environmental impact was unfortunate but back in 80's one could say China wanted to move forward at all cost.

One also has to applaud the strategic mindset of the CPC by secretly taking over the entire REE production from the US (whom they were dominant) - Reference Molycorp, Mountain Pass. Back in 08 was the time anyone even heard of REE much less knew that China had already dominated these area for two decades in a strategic move to garner more tech. That was when my team moved into research on this area.

Anyway, given the volume of decline seen (from 74,000 tonnes to 10,000 tonnes from China)....perhaps the world is on it's way to reduce the importance of rare earths, by discovering alternatives.

I agree, which some of your mates happiness ... china reduces the environmental impact by more than 80% when exports reduces from 74,000 tonnes to 10,000 tonnes ... even though it's an economic loss of $ 5,000 per tonne.

Not sure how you arrive at 5,000 per ton but latest prices of REE places the cheapest REE Oxide at 15 bucks per Kilo, fyi there several types of REE and FOB prices range from 15 Bucks to 2K per Kilo

 

[Anonymous user]

I don't get it rare earth metals are not even rare. Why not get them from others?

The problem is the refinery plant cost a bomb to build and many years to construct, its a heavy cost for any organization to take on.

As mentioned in my previous post the REE world is controlled by the China government thru a series of strategies, if a company build a plant and China increases exports it would literally bankrupt any private firms. Its a risky venture and not many are willing to invest unless its government backed.

That said in light of the recent hoo ha's two major firms are now vying for this, Molycorp with their Mountain Pass Mine in the US and Lynas Corp in Australia with their Mount Weld Mine. These are considered viable as they have a functioning Refinery which most firms do not have.

 

[AADHAAR]

If you read my post the foray into Rare Earth was mainly to spearhead a technological drive, the environmental impact was unfortunate but back in 80's one could say China wanted to move forward at all cost.

One also has to applaud the strategic mindset of the CPC by secretly taking over the entire REE production from the US (whom they were dominant) - Reference Molycorp, Mountain Pass. Back in 08 was the time anyone even heard of REE much less knew that China had already dominated these area for two decades in a strategic move to garner more tech. That was when my team moved into research on this area.



Not sure how you arrive at 5,000 per ton but latest prices of REE places the cheapest REE Oxide at 15 bucks per Kilo, fyi there several types of REE and FOB prices range from 15 Bucks to 2K per Kilo

So, you're saying $15000 per ton .. or $2 Million a ton.

Essentially, increasing the economic loss when exports fall from 74,000 tonnes to 10,000 tonnes.
(though, now the impact would be more scary, if the amounts are computed).

I can't find the link (unless I try harder..), but I did read somewhere that chinese people were piling up rare-earths, buying them with their savings. They promised more return than the low interest rate offered by banks.

They won't be feeling good... if 80% of their savings erode in the form of rare-earths which no one is keen to buy.

 

[Anonymous user]

So, you're saying $15000 per ton .. or $2 Million a ton.

Essentially, increasing the economic loss when exports fall from 74,000 tonnes to 10,000 tonnes.
(though, now the impact would be more scary, if the amounts are computed).

I can't find the link (unless I try harder..), but I did read somewhere that chinese people were piling up rare-earths, buying them with their savings. They promised more return than the low interest rate offered by banks.

They won't be feeling good... if 80% of their savings erode in the form of rare-earths which no one is keen to buy.

Well everyone buys into a form of hope, ultimately if the prices crashes they can only blame themselves. Just like the Tulipomania bubble in the 1600s.

Prices of REE can be found here assuming Lynas keeps an accurate update
Lynas Corporation

 

[AADHAAR]

Well everyone buys into a form of hope, ultimately if the prices crashes they can only blame themselves. Just like the Tulipomania bubble in the 1600s.

Prices of REE can be found here assuming Lynas keeps an accurate update
Lynas Corporation

I haven't questioned the prices you quote.

But they are much higher than $ 5000 per ton (which I wrote). Hence dollar loss on a given volume loss increases.

And bigger concern would be for those chinese who are holding on to inventories .... their life saving could erode significantly, unless the prices revert.... and there is somebody to actually purchase those inventories.

 

[Obambam]

Is it?

Place the proposition in front of Mamta Banerjee.. she wants to think 1000 times to allowing a nuclear plant or a car factory.

Frankly, despite all your optimism.... rare earth projects are unlikely to make much headway in India, and when they do .... people are going to insist environmental standards tougher than western world. (you might consider it a fallacy, but it is so!).

With China's latest cut back and restrictions, prices on rare earths have soared. It will be very lucrative indeed. With India wanting to attract more foreign investments to spearhead its economy Manmohan Singh just might nod his head on this deal with the Japanese.

Anyway, given the volume of decline seen (from 74,000 tonnes to 10,000 tonnes from China)....perhaps the world is on it's way to reduce the importance of rare earths, by discovering alternatives.

If they want to discover alternatives, they wouldn't have approached other nations regarding rare earth extraction. It's a case of trying to move away from China's rare earths, but they will not get prices like what they use to anymore.

I agree, which some of your mates happiness ... china reduces the environmental impact by more than 80% when exports reduces from 74,000 tonnes to 10,000 tonnes ... even though it's an economic loss of $ 5,000 per tonne.

It is a great move by China.

China cannot live on these rare earth exports. The rare earths will benefit China more if we use it for manufacturing and exporting our own technology in the near future. The large cut back is a good sign of this starting.

Since we are having an economic war with the Japanese, by allowing the South Korean access to these will punish their economy further. It's a classic case of "借刀杀人" - "do harm to somebody through the hands of another".

The Japanese already lost its market in China due to the island incident will be further hammered by the fact that the South Koreans can access cheaper materials for their electronics.
This will force them to a desperate competition for the rest of the world's market. The Japanese will struggle tinkering with their profit margins in our present economical climate, more so than ever before.

 

[Anonymous user]

I haven't questioned the prices you quote.

But they are much higher than $ 5000 per ton (which I wrote). Hence dollar loss on a given volume loss increases.

And bigger concern would be for those chinese who are holding on to inventories .... their life saving could erode significantly, unless the prices revert.... and there is somebody to actually purchase those inventories.

Honestly China is a multi trillion dollar economy, for example even a 100,000 ton drop in exports at 500 bucks per kilo is 50 Billion which is peanuts to them considering the long term strategy (holding a countries resources).

Also its a strategy, domestic price is at a 40% discount to the FOB price. Now that Chinese local firms can produce supply chain products to support high tech firms the governments is trying to get foreign companies to move their high tech industries into China for manufacturing. The government is trying to move up the high tech manufacturing supply chain. Very simple produce in China get access to cheap REE, if not buy export prices and suck it.

Finally I am not sure why the concern about Chinese who are vested in REE, there are 100's of millions if not billions of Chinese vested in the stock/property market which take precedence. A handful of investors holding on to a investment vehicle they do not fully understand its their own prerogative if they lose their money.

The equation is not as simple as things seem, ultimately China always has a strategy especially when it comes to her natural resources. Countries who trade that resource without any true beneficial gain in the long run suffer eventually.

 

[AADHAAR]

ultimately China always has a strategy especially when it comes to her natural resources. Countries who trade that resource without any true beneficial gain in the long run suffer eventually.

Since you raise the issue of natural resources, .. the coal mined is worth $ 350 billion (china mines 48% of world coal = 3500 million tonnes @$100 a tonne).

If $350 billion is a large amount.... $ 50 billion in rare-earths can't be called peanuts.
(although, $50 billion is quoting your numbers, which I presume are true).

Anyway, back to coal... 48% coal mined in china means that much coal saved elsewhere in the world.

In it's export surplus, china is seeing, well maybe half (i.e. $175 billion) of coal being exported.
(There is no way less than 20% of the world's population can consume about 50% of the world's production and still be a developing country. Inference: 48% of the world's coal isn't consumed in China, but exported in kind).

Just coal exports, would put China in the category of Saudi Arabia, which exports petroleum.

And $175 billion is not far from China's actual trade surplus. So, net value add from china's exports minus exports is abysmally low... if $ 175 billion of coal exports are taken out.

(Btw.. that would still leave less than 20% of world's population consuming 24% of the world's coal domestically; even while china's per capita gdp remains below world average. Hence, saying that half the coal production is exported is conservative.

 

[Anonymous user]

Since you raise the issue of natural resources, .. the coal mined is worth $ 350 billion (china mines 48% of world coal = 3500 million tonnes @$100 a tonne).

If $350 billion is a large amount.... $ 50 billion in rare-earths can't be called peanuts.
(although, $50 billion is quoting your numbers, which I presume are true).

Anyway, back to coal... 48% coal mined in china means that much coal saved elsewhere in the world.

In it's export surplus, china is seeing, well maybe half (i.e. $175 billion) of coal being exported.
(There is no way less than 20% of the world's population can consume about 50% of the world's production and still be a developing country. Inference: 48% of the world's coal isn't consumed in China, but exported in kind).

Just coal exports, would put China in the category of Saudi Arabia, which exports petroleum.

And $175 billion is not far from China's actual trade surplus. So, net value add from china's exports minus exports is abysmally low... if $ 175 billion of coal exports are taken out.

(Btw.. that would still leave less than 20% of world's population consuming 24% of the world's coal domestically; even while china's per capita gdp remains below world average. Hence, saying that half the coal production is exported is conservative.

Would appreciate if we did not jump from one topic to another, if we are talking about coal that's a different ball game. I've traveled to outer Mongolia to check out investment in Coal mines there and the resources and availability will boggle your mind. Coal is no where near as beneficial or as hard to refine as REE, in fact we saw trucks loaded with coal straight from sight and sold across at the Chinese border. If we go down that route this conversation will be sidetracked like crazy. If you like please start another topic. thanks

The 50 Billion dollar figure I put is a crazy over the top estimate with no backing, more likely its way way lower. But in a 7 Trillion dollar GDP economy yes its peanuts, and I stress again cutting the exports is a strategy, the money not earned from the REE exports will be passed down to the local industries.

They are cutting the exports, but that does not mean they are cutting the production.

 

[AADHAAR]

They are cutting the exports, but that does not mean they are cutting the production.

China's largest rare earth supplier halts production ? The Register

 

[Anonymous user]

China's largest rare earth supplier halts production ? The Register

I appreciate you throwing all these articles at random trying to counter me which is fair enough, if they are cutting production due to lack of internal demand that's fair game, I stated what I know from the research I garnered last year. I cannot possibly keep in with every development with REE.
but I have already stated it very clearly.

1. The REE is a strategy by the Chinese government, not some simplistic demand and supply movement
2. The exports mean nothing to the China's GBP, it ultimately ties in with what the strategy is.

I know more then an average forum poster about REE because I spent months on researching it, our investment vehicle made 250% profit on one stock alone. You can try and counter my points with random articles but if you knew what I knew China's REE play would be admirable to many. I no longer track REE developments because its a spent piece of news which can't generate the profits we target (given the risk).

 

[shuttler]

How could private holdings on a large scale be possible as these are state assets!

But regardless of private holding or not, buying those minerals are investments which is not a translation into personal loss until realized

Where did you found Indian's cheering in this thread or is it your catch phrase? .

These steps which Japan is taking are the beginning of tectonic shift in Japanese trade policy.

Cheerleading through starting the thread by a member of the cheerleading team! And you head of cheerleaders mr mms is flying to japan soon to stage another cheerleading there in person!

 

[AADHAAR]

I appreciate you throwing all these articles at random trying to counter me which is fair enough, if they are cutting production due to lack of internal demand that's fair game, I stated what I know from the research I garnered last year. I cannot possibly keep in with every development with REE.
but I have already stated it very clearly.

1. The REE is a strategy by the Chinese government, not some simplistic demand and supply movement
2. The exports mean nothing to the China's GBP, it ultimately ties in with what the strategy is.

I know more then an average forum poster about REE because I spent months on researching it, our investment vehicle made 250% profit on one stock alone. You can try and counter my points with random articles but if you knew what I knew China's REE play would be admirable to many. I no longer track REE developments because its a spent piece of news which can't generate the profits we target (given the risk).

I have no problem and appreciate your research.. .. but if you look at the opening post of this thread, the RE exports have fallen from 74,000 tonnes to 10,000 tonnes (over last 7 years).

(The govt wanted to restrict exports and hence imposed a limit of 30,000 .... but there is no demand. The world does not want to buy even 30,000 tonnes of RE from china).

And the production cut is because prices have fallen too low, resulting in 90% decline in profitability of the referred "largest RE producer".

That said, I don't think $ 50 billion is the true value... could be even as low as $ 1 billion or so..