Most of the media reportings on this topic assume China’s policy is to control the metal market based on a long term plan. They could be wrong. There is a dilemma in China’s policy on the industry that is overlooked.
In contrast with its export control, China was worrying about the decline of rare earths metals trade in 2009, according to a report on the website of Ministry of Industry of Information Technology: China's export of rare earths metals dropped significantly during the first 11 months of 2008 (2008年前11个月我国稀土金属出口明显下降)
The volumne of rare earths metals export dropped 56.1% year-on-year, and that of rare earths alloys went down by 75.5 %. “The trend is that the export is dropping even faster,” it says.
It then analyzed the reasons for the decline.
First, the government has started to impose more control on rare earths trade since 2008. It reduced quota and raised taxes for the export of these minerals.
Second, demands for rare earths dropped as industries such as magnetic materials, computer and toys slow down.
Third, supply surpasses demand. Prices and profitabilities of companies therefore drop.
There are a couple of interesting points here.
First, nobody mentions China’s rare earths import, but it looks to be an important part of the overall policy. The report says it start to control imports of rare earths products since 2008 by listing them into a catalogue on processing imported materials.
Second, it mentioned domestic demand, which is a factor behind its export too.
For instance, the article says:
“For a long time, domestic rare earths enterprises have strong motivation for expanding capacity, but domestic consumption increase is flat due to limits in technology. ”
“As domestic rare earths output keep increasing, exports and foreign consumption drops, but domestic demand is unable to expand rapidly and efficiently, therefore prices of rare earth drop significantly. ”
“The drop of export prices make the profitability of some rare earth enterprises decline sharply,” it says in the end.
Only two years later, the senerio looks totally different. It does not always like this. It won’t always look this either.
In contrast with its export control, China was worrying about the decline of rare earths metals trade in 2009, according to a report on the website of Ministry of Industry of Information Technology: China's export of rare earths metals dropped significantly during the first 11 months of 2008 (2008年前11个月我国稀土金属出口明显下降)
The volumne of rare earths metals export dropped 56.1% year-on-year, and that of rare earths alloys went down by 75.5 %. “The trend is that the export is dropping even faster,” it says.
It then analyzed the reasons for the decline.
First, the government has started to impose more control on rare earths trade since 2008. It reduced quota and raised taxes for the export of these minerals.
Second, demands for rare earths dropped as industries such as magnetic materials, computer and toys slow down.
Third, supply surpasses demand. Prices and profitabilities of companies therefore drop.
There are a couple of interesting points here.
First, nobody mentions China’s rare earths import, but it looks to be an important part of the overall policy. The report says it start to control imports of rare earths products since 2008 by listing them into a catalogue on processing imported materials.
Second, it mentioned domestic demand, which is a factor behind its export too.
For instance, the article says:
“For a long time, domestic rare earths enterprises have strong motivation for expanding capacity, but domestic consumption increase is flat due to limits in technology. ”
“As domestic rare earths output keep increasing, exports and foreign consumption drops, but domestic demand is unable to expand rapidly and efficiently, therefore prices of rare earth drop significantly. ”
“The drop of export prices make the profitability of some rare earth enterprises decline sharply,” it says in the end.
Only two years later, the senerio looks totally different. It does not always like this. It won’t always look this either.
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