The China Daily, the official newspaper of the Communist Party of China, publishes an English-language version each day, to which I am a subscriber. I just now received my Sunday edition – it is still Saturday evening in Detroit as I write this. I ask you to read this story in its entirety and then I will make few comments. I have outlined some sections in red (a good color for reporting from China) for emphasis…
Rare earth association ‘to launch next month’
Updated: 2012-03-31 08:07
By Zhou Yan (China Daily)
China’s long-awaited rare earth industry association is due to be established early next month and will cover the majority of companies in the industry chain, in the latest move to consolidate the ill-regulated sector.
The association, which will have more than 100 members, will be formally launched in Beijing on April 8, according to people with direct knowledge of the situation, who declined to be named.
Several rare earth exploring and processing companies confirmed they have received notification to attend the launch ceremony in April, without elaborating.
There has been widespread market speculation for years that the government would set up an official organization to strengthen ties among the industry’s players.
Such rumors have been escalating in recent years as rare earth prices have experienced heavy volatility amid rampant illegal exploration.
For example, neodymium oxide, one of the major rare earth oxides, rose by as much as 82.7 percent since early 2011 due to speculation, but its price has plunged about 70 percent within the past six months, said Chi Weishan, a researcher at Shanghai Metals Market.
The association will be supervised by the Ministry of Industry and Information Technology, according to a report in the National Business Daily, citing anonymous sources.
The major functions of the organization will include providing production guidelines, market research and channels of communication between companies and the government, the newspaper said, adding that the association will play a role in influencing rare earth import and export quotas.
China, which accounts for about 97 percent of the world’s output of the strategically important minerals, faces pressure from the European Union, the United States, and Japan, which filed a joint cased to the World Trade Organization against China over its alleged unfair controls on rare earth exports.
Minister of Industry and Information Technology Miao Wei was quoted by Xinhua News Agency as saying that China’s policy on rare earths exports does not target any specific country.
China holds about 36 percent of the world’s total reserves of the minerals and has paid the environmental cost for its largely unregulated and heavy exploration of rare earths.
Facing possible trade disputes between China and Western countries on rare earths, one of the industry association’s pressing tasks should be to proactively deal with the disputes and guarantee the interests of the Chinese, said Yuan Zhibin, an analyst at the Beijing-based CIC Industry Research Center.
Other responsibilities will include strengthening communications among companies, and also encouraging mergers and acquisitions in the industry, he added.
The State Council issued a document in May to develop China’s rare earth industry, in which it said the government aims to consolidate 80 percent of the heavy rare earth mining assets in southern China in the three biggest companies in the next one to two years.
This announcement is really about the heavy-rare-earth elements (HREEs) extracted today from the so-called ionic-clay deposits in southern China, by the method of heap leaching. First of all, please note that the Chinese government seems to feel that the cost of environmental remediation has not yet been realized. This means that the HREEs have been produced far too cheaply. I predict that China will not increase its production of HREEs until the environmental issues have been dealt with.
Since Chinese domestic demand for consumer goods utilizing rare-earth-containing components in general, and HREEs in particular, is growing and may well be the fastest growing market in any one nation or even region for such goods, this means that Chinese HREE prices in the short term will immediately come under pressure and then trend upwards. However I think that when China is finished consolidating and remediating the environmental damage caused by the HREE extraction techniques used and by illegal mining it is possible that China may make the decision that it should seek to source HREEs from outside of China, because it may not be possible to increase, or even maintain, current HREE production rates and levels safely from the ionic clays.
I note that this edict covers the supply “chain” and that “exploration” companies in the rare-earth sectors have been “notified to attend.” I suspect that such notifications are identical to “offers” that can’t be refused in Hollywood speak.
I don’t know if there are any hard-rock deposits in China that compare to those in North America, Europe, Australia, and Southern Africa in having relatively high ratios of heavy rare earths to light rare earths. I have never heard of any, but I also know that legal exploration geology in China is highly regulated, and that no licenses will be issued for rare-earth exploration until this June at the earliest, after a nearly two-year hiatus in their issuance.
Most (but not all) of the hard-rock HREE deposits outside of China are of the type that contains significant thorium and/or uranium, so, in those cases, their production technologies must conform to very strict health and safety rules. They have also turned out to be mostly of the types of minerals that form silica gels when “cracked” with ordinary reagents, so their further treatment is a chemical engineering challenge that has been little researched up until the critical nature of these specific metals was recognized, just in the last few years.
I am aware of very significant progress in the cracking chemistry for hard-rock HREE minerals, and I am aware of the existence of large deposits of such hard-rock deposits that are essentially thorium/uranium free.
Japanese heavy industry and Chinese commodity powerhouses are now on the hunt worldwide for these deposits, because of the above-discussed impediments to any increase in their production in China at least for the next few years.
The United States has discouraged Chinese investors from buying control of American rare earth, or indeed of any mineral commodity, deposit or mine. Canada is I believe less reluctant, and, in the case of Japan’s Toyota Tsusho, may in fact be encouraging foreign ownership if it leads to the development of mining and refining jobs in Canada. I note that that the Toyota group has invested tens of billions of dollars in Canada and annually produces nearly ten billion dollars of products within Canada.
The European Union is, like the USA, not so eager for Chinese direct investment, but the heavy industry of the European Union, like Japanese heavy industry, has recognized the security of supply problem specifically with regard to the HREEs. Europe is well on the way to having a total domestic (EU) supply chain in place to produce HREEs by mid-decade. Japan, like Europe, needs only a mine to complete its existing total domestic supply chain.
Note that the world’s largest producers of the light rare earths in Inner Mongolia do not seem to be mentioned in this press release. This is not, I think, because their production has been free of environmental or safety problems, but because such consolidation has already occurred to a great extent under the aegis of BaoSteel’s subsidiary. This is not a good sign for light-rare-earth producers outside of China, because the Inner Mongolian rare-earth deposits are the largest known in the world, and are mined at less than 50% of capacity.
Small investors and the American government need to pay attention to the list of HREE juniors I noted elsewhere last week. A far larger percentage of them will survive the current market cull and go on to profitable production than will survive of the more than 225 light-rare-earth-themed companies.
The American government has done an abysmal job of securing its supply of HREEs and of supporting the re-creation of a total domestic American supply chain.
The Chinese are clearly worried about their domestic security of supply of the heavy rare earths. They are, as the official article above states, going to be proactive in solving that problem. These movements by the Chinese were set in motion long before anyone in the US government finally learned how to spell WTO. The Chinese will not be deterred from their long term goal.
We need to re-learn how to compete not just to whine.