March 10, 2011 / 3:16 AM / 8 years ago

China could become net rare earth importer by 2015 -Molycorp

BEIJING, March 10 (Reuters) - China could become a net importer of rare earth metals by 2015 as it continues to restrict exports and curb illegal domestic production, U.S. producer Molycorp Inc MCP.N said.

A crackdown on illegal trade by China, the world’s biggest producer, is expected to add to the strain on a global market already choking from the country’s decision to slash export quotas for this year, the company’s chief executive, Mark Smith, said during a conference call.

He said on Wednesday that about 10,000 tonnes of illegal Chinese exports reached the market in 2010, and that the volume would certainly fall this year.

“China is very serious about reducing the illegal exports from their country, and they are taking some fairly dramatic measures to make sure that that is coming true,” Smith said, according to a transcript from ThomsonReuters Street Events.

China has launched a nationwide campaign against the illegal extraction and trading of rare earths, saying unregulated mining was causing untold damage to its environment.

“I expect that what we’ll see is a very strong reduction again in 2011 from this illegal market activity.”

China produces 97 percent of global rare earth supplies, giving it a stranglehold on a range of vital elements used in defence technologies, wind turbines as well as the batteries for electric vehicles, computers and mobile phones.

But Beijing, keen to guarantee domestic demand, earns more from rare-earth processing and gains a greater say in global pricing, cut export quotas 35 percent to 14,446 tonnes for the first half, and more reductions are expected in the future.

Molycorp said China’s full-year export quotas were likely to be around 21 percent lower than last year.

China has also decided to establish a strategic rare earth stockpile.

“We have seen numbers out of China suggesting they want to build a stockpile of 30,000 tonnes and then add 5,000 tonnes a year, (but) we have seen the numbers mentioned as high as 200,000 tonnes of material,” said Smith.

Stockpiling activity by China, South Korea and Japan “is applying pressure to a market that is currently experiencing some pretty severe supply and demand and not helping the uses of the materials at the present time,” he said.

Reporting by David Stanway, Editing by Ken Wills

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