China Policy Panics Japan Rare Earth Buyers

Uncertainty of Chinese rare earth policy caused confusion in the market. Japanese trading firms and buyers try to confirm rumor and news from China when Chinese media reported Chinese government terminated new mining license for rare earth mines until June 2010 while some rare earth is expected to be prohibited for export. The supply problem could lift the price while some interests expect the price could decrease depending on remaining export license.

Chinese government controls exploration and mining of rare earth, antimony and tungsten, for which China represents 80-90% of world supply, through license. The government announced China stopped to issue the license until June 2010.

The termination is apparently to preserve the resource and to support the price. The ore production tends to exceed actual demand under slow demand when the miners try to increase the production to secure higher volume of mining license, which is issued based on production in previous year.

Chinese government is expected to prohibit some rare earth items including dysprosium and terbium. Japanese trading firm source said the prohibition is still subject to central government’s approval. However, Japanese traders and buyers try to confirm the credibility when the potential supply stop could impact on Japanese production of appliances and vehicle motor.

Chinese government issued 33,300 tonnes of export license for rare earth for 2009, which is 2.5% lower than previous year. However, under the slower demand, the license is apparently much higher than actual export volume. Chinese exporters could export the materials at lower price to secure the export volume, which is based on export license for 2010.