Chinese Rare-Earth Export Quotas for H2-2011

by Gareth Hatch on July 14, 2011 · 24 comments

in China, News Analysis, Rare Earths

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The Chinese Ministry of Commerce today announced the allocation of rare-earth export quotas to individual companies operating in China, for the second half of 2011. The total allocation for H2-2011 is 15,738 t of rare-earth materials to 31 different companies in China (with seven of these companies contained within two different business groups). This gives us a total of 30,246 t of quota allocated for 2011 - almost the same amount as allocated in 2010.

A comparison of the quota allocations for the past three years is shown in the table below:

Export quotas for the Chinese rare-earth industry
Source: Chinese Ministry of Commerce
2009 2010 2011
Sub-group H1 (t) H2 (t) H1 (t) H2 (t) H1 (t) H2 (t)
Domestic 15,043 18,257 16,304 6,208 10,762 12,221
Foreign-owned 6,685 10,160 5,978 1,768 3,746 3,517
Sub-Total 21,728 28,417 22,282 7,976 14,508 15,738
TOTAL 50,145 30,258 30,246

The individual allocations of quotas are listed in the table below, divided into lists for Chinese- and foreign-owned companies. The two lists are sorted from highest-to-lowest allocation.

It can be seen that once again, the rare-earth enterprises operated by Rhodia (Baotou Rhodia Rare Earth Company and Liyang Rhodia Rare Earth New Materials Company) and Neo Material Technologies (Zibo Jiahua Advanced Material Resources Company and Jiangyin Jiahua Advanced Material Resources Company) received between them the majority of quota allocations for foreign-owned companies, operating in China.

Allocation of rare-earth export quotas to individual companies in China, for H2-2011.
Source: Chinese Ministry of Commerce
Exporting Company: Chinese-Owned Allocation (tonnes)
Baotou Huamei Rare Earth Hi-Tech Company* 1,112
Inner Mongolia Baotou Steel Rare Earth Hi-Tech Company* 979
Inner Mongolia Baogang Hefa Rare Earth Company* 858
Leshan Shenghe Rare Earth Technology Company 840
Shandong Pengyu Industrial Company 802
China Minmetals Nonferrous Metals Company** 773
Gansu Rare Earth New Materials Company 746
Sinosteel Corporation 666
Yiyang Hongyuan Rare Earth Company 664
Xuzhou Jinshi Pengyuan Rare Earth Materials Company 502
China Nonferrous Import-Export Company Jiangsu Branch 483
Jiangxi Rare Earth Tungsten Industry Group Company 461
Guangdong Rising Nonferrous Metals Group Company 449
Ganzhou Chenguang Rare Earth New Materials Company 424
Jiangxi South Rare Earths Hi-Tech Company** 396
Funing Rare Earth Industry Company 351
Grirem Advanced Materials Company 346
Ganzhou Qiandong Rare Earth Group Company 303
Baotou Tianjiao Seimi Rare Earth Polishing Powder Company* 271
Jiangsu Geo Quin Nano Rare Earth Company 262
Changshu Shengchang Rare Earth Smelting Company 189
Guangdong Zhujiang Rare Earth Company 186
Ganxian Hongjin Rare Earth Company** 158
Exporting Company: Foreign-Owned Allocation (tonnes)
Baotou Rhodia Rare Earth Company 935
Zibo Jiahua Advanced Material Resources Company 835
Jiangyin Jiahua Advanced Material Resources Company 475
Yixing Xinwei Leeshing Rare Earth Company 431
Liyang Rhodia Rare Earth New Materials Company 319
Huhhot Rongxin New Metal Smelting Company 301
Baotou Santoku Battery Materials Company 146
Pingyuan Sanxie Rare Earth Smelting Company 75
Sub-Total: Chinese-Owned 12,221
Sub-Total: Foreign-Owned 3,517
Total for H2-2011 15,738

* Part of Baotou Steel Group Corporation, which was allocated a total of 3,220 t.
** Part of China Minmetals Corporation, which was allocated a total of 1,327 t.

It is likely that the individual quota allocations were made according to a formula similar to that previously used, What is unclear at this point is whether or not new types of materials have been added to the list of rare-earth-containing compounds, for the purposes of being counted towards the quotas, when exported. Some ferroalloys are now on the list, but I don't think that their presence is the big deal that some commentators are making them out to be.

The allocated quota numbers for H1-2011 were almost certainly NOT all used up, by June 30, 2011. In fact, all indications are, from the export statistics (murky as they are), that there was a significant shortfall. Granted, the likely root cause of the shortfall is the very high price for many of these materials at present.

The greatest speculation surrounds the potential inclusion of neodymium-iron-born (Nd-Fe-B) alloys, used for permanent magnets. At present there is no evidence to suggest that the list of materials to which the quota allocations apply, included Nd-Fe-B; almost all of the companies listed above are the same as in previous years, and are associated with simple compound production, not Nd-Fe-B alloy production.

However, we'll continue to look into this and we'll let you know if we find out any more detail on the list of materials covered.

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{ 24 comments… read them below or add one }

1 robit July 14, 2011 at 4:58 pm

Gareth > Do you know if the companies can sell or trade their quota allocations?

2 prescient11 July 14, 2011 at 5:13 pm

Gareth,

Do you have any estimation as to the tonnage figure that would be made up by the new inclusion of the alloys? Do you think the 3k figure being put forward is too much?

Thanks

3 Gareth Hatch July 14, 2011 at 5:21 pm

@robit: I’m not sure if they are officially allowed to do that, but my understand is that in reality it does happen, yes.

@prescient11: I’m rustling the trees on that very question, even as I type :-) The 3kt number seems high to me, just because the most important reason for the inclusion of ferroalloys, was to get FeDy eutectic and similar compounds included – previously traders were selling Dy outside of the quota system, using such compounds. But the thing is – the world doesn’t really use a whole bunch of Dy… and even if we factor in the proportion of such alloys that are not rare-earth elements, and their impact on the amount of quota that would get “used up” with such alloys – I just don’t think it would be really worth a trader’s while to waste so much quota in that way.

Let’s see what we can find out on this :-)

4 prescient11 July 14, 2011 at 5:51 pm

Thanks Gareth, very interested to hear your findings on this…

5 barry Zern July 14, 2011 at 7:08 pm

Gareth, you make a strong argument the alloys are not included in this quota number.

Bloomberg has quoted an EU official saying the alloys are included in this number, however it would not be the first time Bloomberg has got a story very wrong.

6 Gareth Hatch July 14, 2011 at 7:16 pm

@Barry Zern: just in case there’s any confusion – precursor alloys may well be included; it’s the Nd-Fe-B alloys that I’m not so sure about.

7 robit July 14, 2011 at 9:15 pm

A press release from Lynas puts the ferrous alloys at 2,000 t >
http://www.asx.com.au/asxpdf/20110715/pdf/41zshtqzvgbdx9.pdf

8 prescient11 July 14, 2011 at 9:45 pm

Robit’s link also mentions that Lynas is of the view that the alloy quota does not include magnets.

Interesting as to what this will mean.

9 Gareth Hatch July 14, 2011 at 9:54 pm

@robit: thanks for that.

@prescient11: I’m not sure that it means as much as you might think. Over the past few years, China has continued to increase the total amount of rare earths that it produces, regardless of the export quotas. This means more material continues to be available, legally or otherwise, for consumption within China and elsewhere. Last year, for example, official Chinese estimates are that 118,900 t of REO equivalent were produced.

I wouldn’t be surprised if we see a reduction in the official monthly export numbers for ferroalloys containing rare earths, compared to the prior period. Such a reduction won’t mean an _actual_ reduction in total exports…

10 blackjack July 14, 2011 at 10:31 pm

one only has to look at the increase in products that demand REE’s and this in turn will increase the need for China to keep its REE’s for producing these items.

Japan and Germany have already jumped into bed with Lynas so that they can secure REE’s for phones, ipads, and magnets used in wind power.

It wont be long before the squeeze is really on as China is shutting down all those little backyard polluting small mines.

PLUS i hear that CHina has huge issues with power and there are frequent power outages. This effects production and so I dont think they could expand until they sort out their power issues.

11 prescient11 July 14, 2011 at 11:40 pm

Yes, I concur with blackjack’s thoughts. Gareth, I fully understand what you are saying, but official Chinese production this year is 90k tonnes. And their domestic use is up 20% yoy.

What happens when they really get a handle on all the illegal mining, or a substantial part of it.

12 Gareth Hatch July 14, 2011 at 11:57 pm

@blackjack: consistent access to power is indeed an issue in certain parts of China, especially in the summer months. In recent years there have been scheduled outages and there are indications of more of the same this year. Obviously this can significantly affect lead times and availability of production within a variety of industries.

@prescient11: there are two elements to the “uncontrolled” exports of rare earths. One is the production and subsequent separation of materials that come from illegal mines. There are certainly indications that the authorities are becoming more effective at shutting down these operations.

However, the second element is the potential export of materials that were mined and separated legally – exported either by traders who do so without a quota allocation, or beyond the quota that they were officially allocated. This is far trickier to control. There are plenty of anecdotes of end users outside of China receiving rare-earth-containing materials, that are labelled as something else.

The increase in domestic prices in China for rare earths, is probably as a result of less material being available to domestic end users. In addition to the internal stockpiling going on by speculators and others within China, I believe it likely that the higher prices that traders can obtain by selling such materials to non-Chinese customers, is also taking material off the domestic market (regardless of who has what allocations of quota – when there’s money to be made, people will continue to take risks).

As for the “official Chinese production” being 90kt this year, I would point out that last year’s official production quota number was 89.2 kt, and yet the officially estimated actual production was 118.9 kt – obviously way over the official production quota. I see little reason to believe that the actual production for 2011 will be much lower than 2010. I believe that it will be substantially more than the official production number for 2011 of 93.8 kt, based on past outcomes.

Finally – do you have a source for your figure of a 20% increase year-on-year in Chinese internal usage?

13 prescient11 July 15, 2011 at 2:28 am

Gareth,

May I just say, from all of us ploebes, thank you for your analysis and constant vigilance in this area. I know we have had our “dust ups” in the past, but your knowledge and expertise in this area is very valuable to the layperson trying to understand this area and your opinion is very much respected.

With that said, the 20% yoy increase was reported by CARE in Vegas.

I thought that the quota was a bit high compared to what I expected, but it had been telegraphed that it was 30k tonnes going forward. The real question is how they handle the illegal or non-official production.

Honestly, my cue or reference is what the big dogs in the industry are doing. It seems the price levels are being set by the big dogs. Interesting time ahead. Domestic prices are the real deal.

And thanks again for applying such crack and timely analysis on the deep mud issue. Amazing what these clowns will come up with. Thanks for all your help in trying to clear the “mud” in this space, Lord knows there is enough of it!

14 Recover July 15, 2011 at 6:14 am

“The country is committed to providing a stable supply for the international market, said Wang Caifeng, a former official at the Ministry of Industry and Information Technology and a key player in establishing a rare earths industrial association.

She said the export quota is in line with the country’s production plan.

China produced more than 120,000 tons of rare earths last year, with 87,000 tons for domestic use and 34,600 tons for export. The production quota this year is expected to grow by 5 percent, she said. ”

http://www.chinadaily.com.cn/cndy/2011-07/15/content_12907149.htm

15 Carl Gutman July 15, 2011 at 10:54 am

Good Morning Gareth,

I grew up in ‘the suburbs of Chicago’, what’s the problem(s). How can i help?!

16 Joanne July 18, 2011 at 9:33 pm

I also attend that rare earth conference ., be reminded when china say yes does not mean yes . 5 percent increase in quotas can not satisfy the growing demand of global market , especially in new emerging markets such like power , hybrid car .
We believe it will be mainly depend on global market demand .

The key decision is by Chinese government .

Company like baotou steel high tech is state owned company their performance is not by their performance in the company and market but determined by government decision .

17 Recover August 11, 2011 at 7:02 am

I thought the 1st semester quota was 14,446, not 14,508. Several sources suggest the total yearly quota is 30,184 not 30,246. Can you please explain?

18 Gareth Hatch August 14, 2011 at 1:48 am

@Recover: the H1 2011 quota allocations included 62 t allocated to Pingyuan Sanxie Rare Earth Smelting Company, but it was initially provisional,only available once its infrastructure improvements were inspected and approved by a local regulatory agency in March 2011.

19 Peter Griffin August 28, 2011 at 8:02 pm

Hello Gareth,

Sorry for coming late into the discussion. Your last post is interesting Gareth. This looks to be a proof of the enforcement of new technical and environmental regulations by the Chinese Government …

20 Vic September 28, 2011 at 11:27 pm

Hi Gareth,

Thanks to provide a lot of consolidated information abt REE.
One of my co-workers in China said he got the below numbers from CHINA’s Ministry of Commerce.
2008 : 34156t
2009 : 31310t
2010 : 24280t
2011 : 30184t

The 2009~2010 numbers are very different from the numbers of your update. I also cross checked Hitachi Metals (Neomax) numbers and they are very close to yours. Could you help to clarify where is the possible gap? Thanks!!

21 Gareth Hatch September 29, 2011 at 12:29 am

@Vic: not sure where the issue lies… my numbers were drawn from the Chinese language side of the Chinese Ministry of Commerce’s Web site…

22 Vic September 29, 2011 at 1:35 am

Hi Gareth,

Thanks for the quick reply!
Is it convenient to provide the 2009 & 2010 export quotat announcement link at MOFCOM’s web. The announcements in their website are not
so organized… I really to dig out where that gap is.
Appreciated!

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