* China plans rare earths export cut by 30 pct in
* Rare earth reserves may run dry within 15-20 years
* China seen paving way to stop rare earths
(Adds comments from Japan foreign minister)
By Fayen Wong and Tom Miles
SHANGHAI/BEIJING, Oct 19 China plans to further
cut export quotas for rare earth metals next year, local media
reported on Tuesday, putting further pressure on importing
nations to swiftly find new sources of supply.
China, which accounts for more than 90 percent of the
world's production of rare earths, plans to cut export quotas
by up to 30 percent in 2011, the China Daily reported on
Tuesday, citing an unnamed official with the Ministry of
The Ministry of Commerce could not be reached for comment.
Analysts say China has huge amounts of economically viable
reserves that are unlikely to be depleted soon, but reckon
Beijing's recent protectionist stance on rare earths exports is
a sign that it could soon cut exports to a negligible amount in
a bid to reserve supplies for domestic consumption.
"It does look like they are genuinely worried about
supplies and don't care what the international price is. The
message they are sending is that they want to see other sources
of supply being developed," said Trent Allen, a metals analyst
in Resource Capital Research in Sydney.
"Chinese officials have also talked about building a rare
earths reserve and all the recent comments suggest that they
may be planning to stop exports in the future."
Premier Wen Jiabao said earlier this month that China's
measures to control rare earths exports were geared to
"sustainable" exploitation of the minerals and pledged not to
impose a complete ban on exports.
"We may not see a complete ban because that could bring a
new set of trade problems, but they could cut shipments to a
very small number," said a second analyst who declined to be
For a factbox on rare earth elements:
For factbox on Japan-China frictions:
Insider on rare earths:
A Chinese Foreign Ministry spokesman declined to comment
whether export quotas would be reduced again next year, but
reiterated that recent cuts were aimed at protecting the
"Every country has the right to use its own resources in a
reasonable way. China has been providing low priced rare earth
to the world for a long time. China recently put some necessary
restrictions on the rare earth industry based on domestic
regulations," the spokesman, Ma Zhaoxu, told a regular news
conference on Tuesday.
China's reserves of rare earth have dropped by 37 percent
between 1996-2003 and might run dry within 15 to 20 years if
the current rate of production is maintained, the Ministry of
Commerce said on Oct. 16.
Any substantial cuts to heavy rare earths exports, which
are scarce and needed for a number of sophisticated electronics
manufacturing processes, would hit high-tech firms and
Analysts said a move by China to further cut its rare earth
supplies could also prompt an international backlash from key
importing nations, such as the United States, Japan and Korea,
who could complain to the World Trade Organisation.
China's recent move to halt shipments of rare earths to
Japan amid a political dispute has also raised the spectre that
Beijing could use its monopoly over those resources as a
political tool, prompting Japan to scramble for alternative
supplies and set up a reserve. [ID:nSGE68S0L4][ID:nTOE690034]
Japanese Foreign Minister Seiji Maehara told a seminar on
Tuesday that one of the main pillars of Japan's foreign policy
is to diversify supply sources of food, energy and natural
"It is not good to rely on one country for natural
resources, energy or food. We need diplomacy that helps
diversify supply sources so that we have stable supplies even
in the case of an emergency."
The Japanese government has come up with a plan to spend a
total of 100 billion yen ($1.2 billion) to develop new rare
earth mines abroad and to recycle the materials at at home,
while supporting companies being exposed to the risk of
volatility in their prices.
China has been steadily reducing export quotas since 2005
for rare earth elements, which consist of 17 metals that are
the life blood of green technologies such as hybrid cars and
wind turbines as well as mobile phones and missile guidance
Just three months ago, Beijing said it was slashing its
rare earths export quotas by 72 percent for the second half of
2010 to 7,976 tonnes, compared to 28,417 tonnes a year ago.
The dramatic squeeze in supply has prompted an average 300
percent spike in rare earths prices between January and August
this year, with price increases for each individual metal
ranging from 22 percent to as much as 720 percent, Nomura
Securities' chief strategist Sean Darby said in a recent
Companies that have latched on to the opportunity presented
by a looming supply shortage in some of the rare earths metals,
such as Australia's Lynas Corp (LYC.AX) and Molycorp Inc in the
United States, have seen their shares surge in recent months.
Shares in Lynas, which have surged 215 percent from a year
ago, were up 5.5 percent by midday trade, outperforming a 0.26
percent gain in the broader market .
Currently, only a few facilities process rare earth oxides
outside China, accounting for less than 10 percent of the
The volume of China's exports fell for three months running
to 2,364 tonnes in August, the last month for which data is
available. That month saw a 6.2 percent decline in volumes from
August 2009, the first such year-on-year decline in 2010.
But thanks to soaring prices, the value of August's exports
continued to rise, up almost threefold year-on-year and 17
percent up from July 2010, despite a 30 percent fall in
(Additional reporting by Ben Blanchard in Beijing and Risa
Maeda in Tokyo; Editing by Michael Urquhart)