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At more than $100K/ton, the price of rare earth metals exported out of China is up 9-fold from a...

At more than $100K/ton, the price of rare earth metals exported out of China is up 9-fold from a year earlier. At the same time, Chinese restrictions on exports has led to a collapse in trading volumes. Rare earth miners have recovered from losses in the wake of the earthquake.
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  • lbashaw
    , contributor
    Comments (28) | Send Message
     
    If one is unable to see the key takeaways from the new data a ton of money will be lost investing in MCP, AVL, etc.

     

    Takeaway 1. The industry is tiny. Add the numbers up.

     

    Takeaway 2. China is being marginalized. Notice the large drops in purchases.

     

    Takeaway 3. The artificial rise in prices is foreshadowing that the bubble will soon burst. "Squeezes" by their nature are artificial and therefore temporary.

     

    BEIJING (Dow Jones)--The value of China's exports of rare earth ores and
    metals in the first two months of the year increased by almost seven times, or
    568%, to $314.3 million, the semi-official China Customs Statistics published
    by Hong Kong-based Economic Information & Agency said.

     

    The rising value reflects the success of China's efforts to force up prices
    for a commodity that is crucial in high-technology manufacturing. Although
    China accounts for only about a third of known rare earth reserves, it
    controls more than 95% of global output and exports now, giving the country an
    outsized influence on prices.

     

    While Beijing has been widely criticized for its increasingly restrictive
    export quota on rare earths with some blaming it for choking supply lines to
    push geopolitical goals, the trade data indicate China may be more interested
    in its declared goal of pushing up prices of these increasingly important
    minerals from the rock bottom levels that forced most non-Chinese producers
    out of the business.

     

    Latest signs show the government is succeeding in gradually gaining control
    over prices.

     

    The higher prices in the first two months have more than offset the very
    slow growth in actual export volumes, which inched up just 0.3% on year to
    7,084 metric tons, according to the agency's data. The estimates are based of
    official customs figures, sourced from the government.

     

    In January, this trend was even more pronounced, with export value jumping
    nearly fivefold, or 376%, from a year earlier while actual volumes declined
    29% from January of last year, to 4,087 tons.

     

    In February alone, China exported 2,976 tons of rare earth ores and metals,
    valued at $160 million, according to the CCS data.

     

    Last year, customs data showed China exported 39,813 tons of rare earth,
    down 9.3% from 2009 -- smaller than the actual volume purported in its export
    quota policies -- while the value of those exports tripled.

     

    China has cut its quotas for exports of rare-earth metals for the first half
    of 2011 by around 35% on year. In 2010, the government said it had slashed the
    export quota by about 40% for the full year, although customs data suggest the
    actual decline in export volume was much less aggressive.

     

    A steady stream of government and global rhetoric on China's rare earth
    exports belies the relatively small size of the industry. China's 2010 rare
    earth exports totaled just $939.72 million, about a tenth of what China spends
    on fuel oil in just one month.

     

    While China controls most of the 17 elements collectively known as rare
    earth, it only possesses about a third of global reserves.

     

    Beijing has long sought more control over prices for these raw materials,
    aiming to consolidate mining at home, and match Japan and the U.S. in their
    strategic rare earth reserves, the Eurasia Group said last month.

     

    However, the Eurasia Group noted that rising prices may actually backfire on
    Beijing's plans.

     

    "Ironically, driving up prices might have the unintended consequence of
    rallying local governments and private players to resist consolidation, as
    they move to protect resources that are now viewed as more profitable," said
    Damien Ma, a China analyst for the consultancy based in Washington, D.C.
    22 Mar 2011, 09:02 AM Reply Like
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