In recent days we've seen a flurry of activity concerning reports that the Chinese Ministry of Industry and Information Technology [MIIT] has called for a total ban on foreign shipments of certain rare earths such as terbium [Tb], dysprosium [Dy], yttrium [Y], thulium [Tm], and lutetium [Lu]. These reports also claim that other rare earth metals such as neodymium [Nd], europium [Eu], cerium [Ce], and lanthanum [La] will be restricted to a combined export quota of 35,000 tonnes a year, "far below global needs".
I spoke earlier today with John Ebert of Yunsheng USA, the US arm of a fully integrated Chinese "mine-to-market" magnetic materials company. He had recently spoken with colleagues in China who had access to the report in question, and was able to get a different perspective on it. Being fluent in the language also helps John to understand the nuance and dynamic of the original document.
John sent out some notes on his own investigation into the MIIT report earlier today, and gave me permission to discuss them here. Some of his key points were:
- The original report that has been widely cited, is simply a draft and has not yet made its way through the various official government channels [as Jack Lifton has recently mentioned on this subject]. Much like with bills passing through the US Congress, such a draft proposal might take years to make its way through the legislative process, assuming that it even survives in its original form.
- The draft document originated from entities in Baotou, Inner Mongolia and not from the central government in Beijing. As many people know, Baotou’s economy is vastly dependent on rare earth mining and therefore, groups in Baotou are concerned over the depletion of their chief economic resource. The draft document was apparently proposed via the MIIT in order to achieve some legitimacy.
- The draft document itself mainly concerns the restriction of sale of rare earths in the form of raw ores. Nd ore, the chief ingredient in Nd-based [Nd-Fe-B] magnets, might be subject to some quotas. The additive ores [e.g. Dy, Tb, Y, etc)] are used in small quantities in Nd-Fe-B production to enhance the temperature properties. The total amount of additives used in high-temperature Nd-Fe-B magnet materials varies between 3-8%.
- John said that when it comes to rare earths for Nd-Fe-B magnets, non-Chinese magnet manufacturers such as those in Japan and Germany may well be affected by quotas on rare earth metal ores. Licensed Chinese magnet manufacturers [and their customers and distributors] would, however, likely benefit, as Japanese and German processing companies would have to pay higher prices for these ores. In addition, higher rare earth ore prices would, in theory, encourage non-Chinese producers such as Molycorp, Arafura and others to bring back production at fair market pricing and to further encourage new ventures such as Avalon's Thor Lake project to accelerate.
- The sale of Chinese Nd-Fe-B magnets, which constitute the bulk of worldwide Nd-Fe-B production [including magnets for wind turbines and electric vehicle motors], would themselves be unaffected by this draft proposal. Were the proposal to go through, licensed Chinese manufacturers would continue to develop, manufacture and sell Nd-Fe-B magnets without such restrictions.
John felt that North American and other purchasers of Chinese Nd-Fe-B magnets really had little to be concerned about, since they neither buy nor process these rare earth ores and since the production of Nd-Fe-B magnets that originate in China, are not restricted or impacted by this draft proposal. He re-iterated that the draft proposal did not represent the official Chinese government position and that it was just that - a draft.
Obvious John's perspective is on the rare earth permanent magnet side of things, which might not be applicable to all areas of rare earth usage. Do we need to be vigilant when it comes to the near- and long-term Chinese strategy for their rare earth metals and other resources? Absolutely. Do we need to develop those alternate sources for rare earths as quickly as possible? You bet! Is the current fever pitch of wailing and gnashing of teeth on this subject warranted, coupled with near-apocalyptic language in the blogosphere, Twitterverse and even in the more conventional media realms?
I don't know for sure - but probably not.
[Disclosure: no positions]