Should the world’s largest rare earth elements (REE) producer China proceed to cap its exports within the next five years, it would probably not have a significant knock-on effect in the current global market, says critical REE project developer Frontier Rare Earths CEO James Kenny. He says the reason is that China is currently expected to fall short of its proposed 100,000 t/y export cap, leaving the present largely balanced market unaffected.
China produces about 90% of the world’s rare earths supply and consumes more than half of this in its own market, which itself continues to grow. China is expected to produce about 90,000 t of rare earths this year.
However, whether or not the giant country decides to implement its REE export quotas in five to eight years, the global industry was expected to feel a pinch as a result of market growth by far exceeding the supply side.
Kenny said that if reports that the World Trade Organisation (WTO) had concluded that restrictions by China on the export of rare earths were not in line with WTO rules were true, he would not be particularly surprised. He expected China to appeal the ruling, which in his mind would very likely be unsuccessful.
What would be missed in the short term is the 30,000 t/y to 40,000 t/y of illegal REEs flooding onto the market from unregulated Chinese producers if China succeeded in its recent efforts to ‘clean up’ its REE industry, and impose stricter environmental regulations and to clamp down on illegal output.
Kenny explained that the “spectacular” rise in REE prices from mid-2010 to mid-2011, when China had previously restricted REE exports, had resulted in a glut of unregulated Chinese REE suppliers flooding the market. This had resulted in significant quantities of REEs from illegal sources entering the market and distorting prices.
However, the Chinese clampdown on illegal market activity would remove a significant portion of the global supply, which could spell trouble.“Clamping down on the illegal output is potentially a positive development and could help to narrow the internal Chinese prices versus its export prices,” he said.
Kenny said the REE market was currently seen as being largely in balance until 2014, but a supply deficit would emerge from 2015 onwards. The demand side could grow to between 220,000 t/y and 240,000 t/y by 2020, leaving a 120,000 t/y deficit. Even if the only significant REE producers outside of China, US-based Molycorp and Australia-based Lynas, managed to achieve their peak output capacities, there would still be a significant supply deficit. And that is not even considering the market growth beyond 2020.
(Edited from an article by Henry Lazenby in miningweekly.com)