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. ®