China rare earth quota prices up as exporters jostle
BEIJING (Reuters) - Limited quotas to export rare earths from China has driven a secondary market where the price of the permits are higher than the price of the minerals themselves, a Chinese industry expert told Reuters.
China sharply cut quotas to export rare earths in the second half of this year, after leaving them unchanged in the first half, catching international traders off-guard. Only a few authorized exporters still have quotas left for shipment.
The shortage -- and cost -- of quotas has helped drive smuggling, said Tiger Pan, managing director of Beijing-based metals pricing service Asian Metal, in an interview with Reuters Insider.
Smuggled outflows could exceed 30,000 tons this year, he said. He said the Ministry of Commerce estimates 20,000 tons of rare earth material were smuggled out of China in 2008.
That would augment legal supplies exported through quotas, which were cut to about 30,000 tons in 2010 from about 50,000 tons in 2009.
"The price of an export permit used to be cheap, but now it's really expensive -- expensive enough that some companies would rather sell their quotas, because you can make more than by exporting," Pan said.
Quota prices for some rare earths elements have risen to about 200,000- 300,000 yuan ($29,910 -$44,870) a ton, Pan said - exceeding the price of the element itself in the domestic market by ten times.
"Of course, this is against government regulations. The permit is non-transferable. But actually, it becomes money. So if I want to earn a bit of money, I'll sell to you, I won't export, you export."
The reduction in quotas and increased efforts against smuggling by Chinese customs led to delays in shipping rare earths from China over the past several weeks.
The New York Times reported in September, citing unnamed sources, that China had imposed an embargo on rare earths shipments to Japan, in retaliation for Japan's arrest of a Chinese ship captain after a collision in disputed waters. On Friday, the Times reported that embargo was lifted, again citing unnamed sources.
Chinese officials have repeatedly denied any unilateral embargo, and trading sources had not independently confirmed that there was one.