The Final Chinese Rare-Earth Export-Quota Allocations For 2012

by Gareth Hatch on August 23, 2012 · 4 comments

in China, News Analysis, Rare Earths

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Earlier this week the Chinese Ministry of Commerce (MOFCOM) announced the second round of allocations of rare-earth export quotas for 2012, to companies operating in China. This follows the initial announcement outlining the first allocation of 2012 in December 2011, and a subsequent update in May 2012.

A total of 9,770 t of export quotas was allocated in this second round, bringing the total for 2012 to 30,996 t. In this article we will take a look at the allocation numbers associated with this week's announcement, before reviewing them in the context of the full year's allocations, and those of recent years. We'll also discuss the possibility of export quotas being eliminated altogether for Chinese rare-earth materials.

As you may recall, the initial allocation of export quotas for 2012 was unusual for a number of reasons. First, MOFCOM issued separate allocations for light (LRE) and medium / heavy (M/HRE) rare-earth products for the first time. Second, MOFCOM clearly telegraphed the year's total export quotas; and thirdly, the Ministry allocated quotas on the basis of whether or not companies had passed new pollution-control standards.

A number of companies that had not received confirmed quotas in December 2011 did so in the May 2012 update. At that time, six companies remained on the provisional list; last week, the Chinese Ministry of Environmental Protection (MEP) published a list of 24 rare-earth companies that had recently passed inspections. Five of the six companies with provisional export quotas were on that list, and thus subsequently had their quota allocations confirmed for 2012. One of those six companies, Pingyuan Sanxie Rare Earth Smelting Co., was not on the list, and has therefore not received a confirmed allocation of export quotas for 2012.

So here is how the quota allocations for 2012 break down:

Allocations of Chinese rare-earth export quotas, for 2012.
Source: Chinese Ministry of Commerce (1, 2, 3, 4)
Allocation (tonnes)
LRE M/HRE Total
H1 Allocation (Dec 2011 + May 2012) 18,585 2,641 21,226
- 1st batch (confirmed Dec 2011) 9,095 1,451 10,546
- 2nd batch (confirmed May 2012) 9,490 1,190 10,680
H2 Allocation (Aug 2012) 8,537 1,233 9,770
Total 27,122 3,874 30,996

We can now drill down into the numbers for the companies that have received quota allocations in this second allocation. Those highlighted in red are the five companies that only recently passed the pollution-control inspections; these numbers represent their total quota allocations for 2012, since they did not received confirmed quotas until now. There is also a new company on the list (highlighted in green) that has not previously received export quotas, but which was included in the MEP's list of companies last week. The list is further divided into sub-lists for Chinese and Chinese / non-Chinese joint-venture (JV) companies. The two sub-lists are sorted from highest-to-lowest total allocation:

Second set of allocations of rare-earth export quotas, issued to
individual companies for 2012. Source: Chinese Ministry of Commerce (1)
Exporting Company: Chinese-Owned Allocation (tonnes)
LRE M/HRE Total
Inner Mongolia Baotou Steel Rare Earth Hi-Tech Co.** 1,192 73 1,265
Inner Mongolia Baotou Hefa Rare Earth Co.** 940 105 1,045
Grirem Advanced Materials Co. 402 41 443
China Minmetals Corporation* 289 112 401
Gansu Rare Earth New Materials Co. 317 38 355
China Nonferrous Import-Export Co. Jiangsu Branch 239 63 302
Baotou Huamei Rare Earth Hi-Tech Co.** 242 14 256
Chalco Rare Earth (Jiangsu) Co. 181 55 236
Ganzhou Chenguang Rare Earth New Materials Co. 196 27 223
Yiyang Hongyuan Rare Earth Co. 204 7 211
Xuzhou Jinshi Pengyuan Rare Earth Materials Co. 185 20 205
Guangdong Zhujiang Rare Earth Co. 130 73 203
Ganzhou Qiandong Rare Earth Group Co. 156 43 199
Shandong Pengyu Industrial Co. 146 21 167
Xi'an Xijun New Materials Co. 139 27 166
Jiangxi Rare Earth & Rare Metals Tungsten Group Co. 159 2 161
Guangdong Rising Nonferrous Metals Group Co. 102 28 130
Jiangxi South Rare Earths Hi-Tech Co.* 107 7 114
Leshan Shenghe Rare Earth Technology Co. 102 0 102
Sinosteel Corporation 96 0 96
Ganxian Hongjin Rare Earth Co.* 27 33 60
Exporting Company: Chinese / Non-Chinese JV Allocation (tonnes)
LRE M/HRE Total
Zibo Jiahua Advanced Material Resources Co. 1,434 57 1,491
Huhhot Rongxin New Metal Smelting Co. 479 50 529
Baotou Rhodia Rare Earth Co. 359 31 390
Yixing Xinwei Leeshing Rare Earth Co. 226 105 331
Jiangyin Jiahua Advanced Material Resources Co. 146 138 284
Liyang Rhodia Rare Earth New Materials Co. 176 53 229
Baotou Tianjiao Seimi Rare Earth Polishing Powder Co.** 95 4 99
Baotou Santoku Battery Materials Co. 71 6 77
Sub-Total: Chinese-Owned 5,551 789 6,340
Sub-Total: Chinese / Non-Chinese JVs 2,986 444 3,430
Total 8,537 1,233 9,770

* Part of China Minmetals Group, which was allocated a confirmed total of 575 t.
** Part of Baogang Group, which was allocated a confirmed total of 2,665 t.

I will note at this point that with the sale of Neo Material Technologies to Molycorp a few months ago, Zibo Jiahua Advanced Material Resources Co. and Jiangyin Jiahua Advanced Material Resources Co. are now part of the Molycorp group.

Here is a comparison of the quota allocations for the past four years:

Export quotas for the Chinese rare-earth industry (tonnes)
Source: Chinese Ministry of Commerce
Year Period Chinese-owned Chinese /
Non-Chinese JV
Sub-Total TOTAL
2009 H1 15,043 6,685 21,728 50,145
H2 18,257 10,160 28,417
2010 H1 16,304 5,978 22,282 30,258
H2 6,208 1,768 7,976
2011 H1 10,762 3,746 14,508 30,246
H2 12,221 3,517 15,738
2012 H1 16,066 5,160 21,226 30,996
H2 6,340 3,430 9,770

We can see that there has been little change in the total quantity of allocations in the past three years, even if the structure and methods of allocations have evolved. Probably the most significant development was this year's split into LRE and M/HRE product quota allocations for the first time.

Clearly a lot of time and effort goes into the allocation and export quotas for the rare-earth industry in China. Recent figures indicate, however, that at no point since the introduction of export quotas several years ago, has the amount of rare-earth products exported through official channels, come close to the specified quota limit. Compare the estimate from the Chinese State Council Information Office (published in a June 2012 white paper on rare earths), of 18,600 t of exports through official channels in 2011, to the 30,246 t of export quotas that were allocated for the same year. Compare those numbers in turn, to the approximately 41,300 t 22,320 t of rare-earths imported into countries outside of China, based on estimates in that same white paper (indicating that 55% 20% of all rare-earths imported into countries outside of China were smuggled or otherwise illegally obtained from China).

Perhaps this is why in just the past few days, we've started to hear stories of Chinese rare-earth industry executives, asking the Chinese government to consider the possibility of abolishing the export quotas altogether (given the fact that the quota allocations seem to have little effect on the amount of materials actually exported from China, legally or otherwise). Eliminating the export quotas would of course be a significant development in the context of the recent complaints to the World Trade Organization about China's export practices for rare earths and other materials.

Given the imminent arrival of new supplies of LREs from sources outside of China, it is entirely possible that the quotas for LREs will be eliminated in the near future. For M/HREs, I am not so sure that the quotas will be eliminated quite so soon. Being able to make these decisions, however, is of course made much easier by the recent split into quota allocations for LREs and M/HREs.

Stranger things in this industry have happened...

Update - August 23, 2012: the data for the estimated quantities of rare earths imported into countries outside of China has been amended to reflect that the estimate made by the Chinese authorities was 1.2, not 2.2 times, the amount exported through official channels in 2011. It should be noted that the estimate in the white paper of the amount of materials smuggled, did not include materials deliberately mis-labelled as something other than a rare-earth product, so the estimate of 20% is undoubtedly conservative.

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{ 4 comments… read them below or add one }

1 G H August 23, 2012 at 11:41 am

Gareth,

Thanks as always for reliable information which is almost impossible for the retail investor to obtain.

I imagine abolishing the quotas will be a very hot topic in informal discussions at the Sept 12-14 conference in Guangzhou, as well in as Steve Mackowski’s session. After the conference, an update posted here would be deeply appreciated!

– Gary H

2 henk mol August 24, 2012 at 2:39 am

Hello Gareth,
Thank you for keeping this update going. For me as a representative of a mechatronic component maker, the question is not the raw material export, but more “What magnet volumes are actually available to make efficient internal permanent magnet motors and with what delay time” for the purpose of hybrid and electrical cars. The quota deal with RE oxides, so how about finished products (that is magnet metal mixtures, raw magnets, and finished magnets) or even complete motors? Is there any statistics being kept of these export products? Will there be significant delay in magnet production requiring >6% Dy if there are shortages in especially that kind of raw material? Will this impact the amounts of IPM motors made before end of 2015, when the “super credits” for electric cars of the EU emission regulation will pass out?
It does make a huge difference whether to make parts for IPM motors or whether we will be stuck to induction motors, wound rotor motors or variable reluctance motors in the nex gen hybrid cars.
Regards, Henk Mol

3 Gareth Hatch September 7, 2012 at 12:52 am

@GH: I won’t be at that meeting.

@henk mol: at present there really aren’t any supply issues with Nd-Fe-B magnets (costs aside). From what I hear, most factories in China are running at 30-40% capacity at most and could easily ramp up if required. I am also not aware of any real shortages of Dy, despite the usual mainstream hype on the subject.

4 Alessandro December 3, 2012 at 5:20 am

Dear Gareth,
I am a student that works on FDI in rare earths economy. I would know if there is a link between chinese ban on rare earths exports and the development of hight tech batteries and hybrid cars.
Thanks in advance
Alex

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