China has taken quite a financial hit from the fall of rare earth prices — and its own export restriction policy. This becomes obvious when you look at figures compiled by Australia’s federal Bureau of Resources and Energy Economics (BREE) in their latest China Resources Quarterly (released in partnership with Westpac Bank).
In the June 2011 quarter, its REE exports were worth around $500 million. Remember this was the about the time of the apogee of rare earth prices. That quarter China exported just over 3,000 tonnes of REE, even though it was the first sign of a contraction of yttrium oxide exports; by comparison, neodymium volumes did not contract severely until March 2012. In the September quarter 2011, the following three months to the $500 million bumper period, exports were back to about 1,800 tonnes, but the income was still strong, exports earning around $375 million.
But then look at the September 2013 quarter: exports are a whisker under 5,000 tonnes — more or less in total terms what they were back in the September 2010 quarter — but revenue is less than $100 million. Of course, one of the factors is the collapse of the lanthanum price, that element making up more than half of total exports in the latest figures; cerium, by contrast, was under-represented, almost equal in content to yttrium exports.
As for cerium, in the September 2010 quarter, Chinese exports of cerium oxide and hydroxide totalled 700 tonnes, but two years later in September 2013 this figure for a three-month period is just over 300 tonnes. In fact, of total Chinese REE exports only lanthanum shows increasing quantities since mid-2012, and the September 2013 quarter set a record since 2010 for sales of this element to overseas customers.
Neodymium exports show the reverse trend: Neodymium oxide exports fell from around 275 tonnes in the December 2010 quarter to under 20 tonnes in the March 2013 quarter, and in the three months to September 30, 2013, they rose, but only to 40 tonnes. In late 2011, China earned around $180 million for Nd sales in the December quarter (250 tonnes) to less than $30 million in the September 2013 quarter.
In March 2012, Chinese exports of europium for the first three months of that year were worth more than $30 million; in the September 2013 period they yielded barely $1 million. Using the same two quarters for comparative purposes, yttrium exports were, respectively, about $60 million and $9 million. Volumes as well as prices had both fallen, of course.
The bottom line: this is the sort of luxury you an afford when you have a trade surpluses and a few trillion dollars in foreign currency reserves. China can sacrifice a billion or two a year in order to conserve its own supplies of REE and other critical, technology metals; that sort of luxury isn’t available if you have an official debt somewhere north of $17 trillion.
The BREE report also includes a run-down of China’s energy policy — important for REE (wind and solar applications) and uranium; in the regard to the latter, somewhere north of 37,000 megawatts of nuclear capacity is under construction in China, but projects now on the drawing board exceed a further 60,000MW.
There are signs that China has been buying large quantities of uranium while prices have been so low, rather than wait until all this extra capacity is up and running, and by which time uranium prices would have certainly risen. After all, spot prices need to be at least double what they are today ($36.75/lb) to get new mines into production.
According to the BREE report, China produces 10% of the world’s nuclear power (the U.S. represents 30% and France 14%). On the uranium production side, Kazakhstan mines 37% of world supply but has 12% of known reserves; by contrast, Australia has 31% of the world’s known uranium but produces just 12% of what comes out of the ground.
China’s electricity generation in 2013 increased by 8% to 5.2 trillion kilowatt hours (kWh), double the rate of growth achieved in 2012.
And here’s the critical point: by the end of next year, China plans to have grid supplies to all areas of the country, with gaps in Xinjiang, Sichuan, Qinghai, Gansu, Inner Mongolia and Tibet to have been plugged by then. But this is not so much so that residents of these far-flung provinces can all have widescreen TVs and microwave ovens as to supply secondary industry; that industry now consumes more than three-quarters of all electricity produced in China.