Prices may be on the move for rare earth elements as China restricts export quotas by 72 percent. Controlling 95 percent of the world market, the drastic reduction to exports will choke the supply of the materials for world consumption. Also, the Chinese are considering making a transparent, negotiation based pricing system.
By Michael Montgomery—Exclusive to Rare Earth Investing NewsThe price of rare earth elements such as terbium, neodymium and others in the group of metals may explode. The Chinese government has dramatically curtailed the export quotas for the second half of 2010. The slow draw down of export quotas over the last five years is well documented and has drawn criticism from the US and other countries. Citing fear of over-production, environmental issues, and a lack of ‘due profit returns,' quotas were slashed by 72 percent. Chinese officials are also considering a pricing system for many of the rare earth elements based on a negotiated price. China has stopped issuing new exploration licenses until June, 30 2011. The reduction of export quotas this week comes on the heels of threats from the US for a WTO trade dispute over unfair practices. Shipments of rare earth elements out of China will be capped at 7,976 tonnes, down from a total of 28,417 tonnes year over year. The move will undoubtedly drive up global prices and ensure that China's domestic needs are met for the materials used in hybrid cars, wind turbines and other high tech goods. The country has also cited a lack of profits for the producers of the metals in their decision to cut back exports. "The rare earths industry officials have realized that, after many years of continued growth in exports, the industry didn't receive due profit returns," Liu Aisheng, director of the Chinese Society of Rare Earth. China controls over 95 percent of REEs worldwide supply, giving the Asian nation an absolute monopoly over the market. American producers of the metals, such as Molycorp's Mountain Pass Mine in California, were driven out of the market by cheap supplies from China. Some have gone as far as calling the actions ‘dumping.' Now it seems that China is ready to cash in on the monopoly they created.