When the subject of quotas for the Chinese rare-earth industry comes up, we're generally talking about export quotas, which control (in theory at least) how much material may be shipped out of China, in any given period, and by which companies. Such quotas are controlled by the Chinese Ministry of Commerce (MOC) and their existence is at the heart of the recent WTO complaints filed by the USA, Japan and the EU, against China.
There are, however, at least two other sets of quotas that affect the rare-earth industry in China. The first concerns the separation and smelting of rare-earth products, controlled by the Chinese Ministry of Industry and Information Technology (MIIT); the other concerns mining quotas, controlled by the Chinese Ministry of Land and Resources (MLR). Of the two, the mining quotas are usually the more prominent, and each year, usually sometime in March, the MLR publishes a list of the mining quotas that have been allocated to each province or region in China.
Each year that is, until this year.
For 2012, the MLR has taken a different approach to the allocation of mining quotas. The first difference is that the Ministry does not appear to have published a single list of mining quotas allocated to the provinces and regions, as it has in previous years. Instead, individual departments for land and resources within the provincial and regional governments were apparently sent a notice roughly titled "2012 Tungsten, Antimony And Rare Earth Mining Quotas (First Batch)" (a copy of which is not available online) indicating the mining quota allocated, and the companies to whom those quotas were to be assigned.
This latter point is also something of a change; it is my understanding that previously the provincial / regional government department got to decide which companies received the mining quotas. I'm going to assume that the MLR has stepped in here to ensure that only companies that meet the pollution control standards as overseen by the Chinese Ministry of Environmental Protection (MEP), may receive mining quotas. This is a similar situation with the allocation of export quotas by the MOC. Sources within China have confirmed that getting quotas of any type for rare-earth production these days, very much depends on being on the MEP's list of approved companies.
The other significant difference to previous practice, is the allocation of only a first batch of mining quotas to the provinces and regions for 2012. While this batching approach has been normal for rare-earth export quotas for years, to my knowledge this is the first year that it has been applied to the mining quotas. The associated provincial and regional announcements on the mining quotas generally reference the MLR's desire to reduce over-production of rare earths, and to maintain rare-earth price "stability".
Just like the split of export quotas by the MOC into light and medium / heavy rare earths for 2012, it is likely that this batching was done in anticipation of the WTO complaint, and gives China some options for the second batch for 2012 in terms of quantities (probably to be announced sometime at the end of Q3 2012). There is almost certainly significant excessive inventory of all finished rare earths in China at present, so even if the MLR decides to reduce the mining quotas for the second part of 2012, this would have little effect on actual availability (though the effects of the new invoicing system that has been mooted for months, may).
Reducing overall mining quotas for 2012 would bolster any response to the WTO complaint that relies on exceptions relating to pollution control and to protecting "exhaustible natural resources", as the Chinese could now justifiably point out that the overall restrictions that they have implemented, affect both domestic and foreign companies.
Of the 7 out of 9 provinces and regions that have announced their mining quotas to date, all but one have received a quota that is 50% that of their total allocation for 2011, with the 7th not far off. 2 of the provinces, Sichuan and Shandong, do not yet appear to have published any information on their mining quotas for 2012. Whether this is because the mining companies to whom such quotas would be allocated, have not yet passed the pollution control standards, or if it is simply because there has been a delay in publishing the numbers, I am not sure.
The numbers that I was able to obtain can be found in the table below, which also shows the allocations in previous years, for comparison.
|Province / Region||2007||2008e||2009||2010||2011||H1 2012|
It should be noted that in previous years, the estimated actual mining production of rare earths in China has been significantly higher than the total mining quotas allocated; in 2010, for example, Chinese sources estimated a total production of around 119,000 t, compared to the 89,200 t of total mining-quota allocations.
As and when we get hold of the numbers for Shandong and Sichuan, I'll update the table.