Effect of China's REE Export Cuts

Source: Resource Investor, Gareth Hatch (7/15/10)

". . .the shortfall will be met by a drawdown of stocks."

In early July, Chinese authorities announced numerous changes affecting its rare earths (REEs) sector, including:

Reducing the total amount of REEs it exports in H210;
Announcing REE prices would be set and published monthly by the central government through a unified pricing structure covering main provinces responsible for REE production;
Planning to eventually consolidate disparate REE producers into 3–5 large conglomerates;
Creating a resource tax to funnel funds from the richer to the poorer provinces.

How will the reduction in export quotas affect buyers of rare earth oxides (REOs)?

"The export quotas for 2010 have been reduced by 40% compared with 2009," said Dudley Kingsnorth, of Industrial Minerals Co. of Australia Pty. Ltd. "This is a far greater reduction than forecast—along with others, I had forecast the reductions would be of the order of 6%–7% in the coming years."

The impact of the change will have far-reaching consequences, particularly outside of China. "Chinese REE export quotas for 2010 are now significantly less than rest of the world (ROW) consumption," said Kingsnorth, adding, "the quotas for 2010 total 30,250t REO compared with ROW forecast demand of 50,000–55,000t. Total ROW production capacity is currently 10,000–12,000t at best, which indicates a shortfall this year 10,000–15,000t at least."

Kingsnorth believes the reduction in export quotas has caused two crossover points. "First, the quotas are less than ROW demand this year, which I did not believe would occur until 2011—and to a lesser extent," he said. "Second, if this trend continues, ROW supply will not be able to meet the shortfall for several years. In the near future, the shortfall will be met by a drawdown of stocks."

There is also one other consequence of significance. "I also believe that the resultant high prices will make elimination of illegal mining in China more difficult," Kingsnorth said.

Announcing Streetwise Live! Events
Source: Streetwise Reports (07/13/2020)

Streetwise Reports is offering 100 investors—at no charge—the opportunity to meet via Zoom with executives of precious metals companies as they discuss recent developments at their companies and upcoming catalysts.

"China's export quota could be opportunity for Canadian miners"

Mexico: Gold's Next Powerhouse Player
Source: Marc Davis, BNW News (11/03/2009)

As the world's key gold producing nations struggle mostly in vain to replenish dwindling below-ground supplies, Mexico is bucking the trend in a big way.

Where Have All the Gold Mines Gone?
Source: Brent Cook, Exploration Insights (04/14/2009)

Given the declining global gold production, mining companies’ demand for reserve replacement and the acute dearth of new gold discoveries, there is no doubt that real economic discoveries will be exceptionally valuable. . .the opportunity for stellar profits is the best it has probably ever been. Identifying the few successes, however, will require vigilant and constant technical assessment of geology and drill results, always with an eye to mine economics.

Congo Completes Mining Review, Says Majors Quit Talks
Source: Reuters (12/20/2008)

"Review process is extended an additional 45 days to allow six companies to return to the negotiating table for direct talks with government ministers."