Sunday, March 6, 2011

More Chinese Rare Earth Element Protectionism......

From far above this issue is very clear.  As I have said so many times before, this is a supply demand trade.  The world is currently using 100ktn per year of these elements.  China is exporting roughly 30ktn this year.  One Australian firm and one American firm should be producing in 2011 and 2012 respectivly and that will add around 30ktn per year to supply.  Those firms do not produce a significant quantity of "Heavy" rare earths though.  The prices of these can be 40x the price of "Light" rare earths.

The article below is just one of the ways that the Chinese are protecting their most valuable weapon in this cold war with the US.

This is still the most misunderstood sector of the market that I have ever studied.  There does not appear to be one analyst at any major investment firm that can even comment on this market.

We continue to patiently hold the right stocks and wait for the catalyst that will send us into Phase 4 of this super major bull run.  A sovereign supply shock will likely be the event needed to wake the world up and send nations scrambling to gain control of their share.

  • Need a Real Sponsor here

China Minmetals Head Backs Beijing Rare Earths Plan

In the latest sign China is on its way to consolidating its rare earths industry, the head of the country’s largest metal and minerals trading company threw his support behind government plans to consolidate the number of companies with access to Chinese rare earths.

A worker waters the site of a rare earth metals mine at Nancheng county, Jiangxi Province.
The comments reinforce a message the Chinese government has repeated for months: Industry consolidation and stricter quotas are coming. At the same time, they’re a reminder of a simmering international trade dispute in which many countries – particularly the U.S. – contend the quotas are a violation of free trade agreements.
China argues that more tightly controlling supply of the metals is a matter of environmental protection and a right it is afforded under international trade agreements.
Zhou Zhongshu, president of China Minmetals, told the state-run Xinhua news agency that under the current setup local officials award mining licenses to smaller local firms, which he says are less likely to embrace environmental protection practices and produce inferior products. He said the current system “hinders the development of the sector,” Xinhua reported.
That’s an oft-repeated argument for the Chinese side, though it is being increasingly challenged in the U.S. and EU. Opponents of China’s plans argue that because China controls more than 95 percent of the world’s rare earths supplies, strategically limiting exports could have significant impacts on the global economy. So-called rare earths are usually defined as a collection 17 elements, which became increasingly important in recent years for their role in producing electronics as well as military weaponry.
Last month, the WTO ruled against China’s trade policies on several key steel-making ingredients. It’s a ruling that industry analysts say clears the way for the U.S. to file formal WTO complaints over China’s rare earths policies.
While the U.S. has grown increasingly concerned over rare earths supply access, China has begun building its stockpile, which further increases the Chinese government’s power to influence the minerals’ prices. Some analysts question the wisdom of China’s stockpiling of rare earths because it raises the hackles of other countries.
“In my view, [a reserve] makes the Chinese position worse,” Steve Dickinson, an attorney at the Seattle law firm Harris & Moure, told The Wall Street Journal.
Neither side seems to be budging in the ongoing dispute. It’s one that has left industry watchers and government officials waiting for a resolution that seems likely only to come from a WTO ruling.
–Brian Spegele

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