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By Stuart Burns

China may have increased its export quotas for rare earth elements (REEs) last year for the first time since 2005, but REE prices are continuing to make a comeback as the actual volumes exported prove to be well below the quotas.

In fact, none of the major sources is exceeding expectations.

China officially exported only 13,000 tons in 2012, about 40% of its quota, and although exports for the first seven months of this year were some 11,185 tons, exceeding last year’s, they are still going to be well down on the full 31,000-ton quota for the full year.

According to Resource Investing News (REIN), the Chinese government just released its production quota for 2013, leaving it essentially unchanged from 2011, at just under 94,000 metric tons. No production quota was published for 2012. That is not the whole story, though.

The government has clamped down on illegal mining and smuggling in an effort to reduce environmental degradation caused by widespread illegal mines, but also to harbor resources for domestic consumers.

Even so, Chinese Vice Minister of Industry Su Bo is reported in the article as saying in May that a black market in rare earths has traded some 40,000 tons of rare earths in previous years; it is the clampdown on this illegal trade that has bolstered rare earth metal prices.

Molycorp, Lynas Corp. Driving Price Crash?

Many folks worried that a number of new projects outside China would flood the market with REEs and cause a crash in prices. Indeed, it was the advent of those rival suppliers that has brought some sanity to the market and cooled prices since the turn of the decade, but the reality is those suppliers are struggling to reach their potential.

Molycorp (NYSE:MCP), operator of the largest rare earths mine outside of China, will fall short of its goal of achieving 19,050 metric tons per year. The company produced at an annual rate of 15,000 tons in the second quarter, according to Bloomberg.

And what about Lynas Corp. (OTCQX:LYSDY)? Not much better…

To be continued in Part Two.

Source: Molycorp Won't Close Gap In Low China Rare Earth Metal Export Quota