EDITOR: | December 20th, 2012

Strong prospects for China’s 2013 Rare Earth Industry Policies (PT 1)

| December 20, 2012 | No Comments

China’s New Rare Earth Element Trading PlatformThis piece is part one of a two part series. As the world’s dominant producer and supplier of rare earths, it seems that China’s policies have attracted worldwide attention in recent years, especially because of tightening rare earth export quotas. I think that export quotas are, in fact, a compelling aspect of China’s rare earth industrial policies and should not be overlooked. However, a more comprehensive view of the rare earth industry might offer a better understanding of the market. The following offers a review of China’s rare earth industry policies in 2012 as well as some prospects for 2013, which is slated to be another eventful year for rare earth industry policies in China.

Part Ⅰ Review of the China’s Rare Earth Industry Policies for 2012

In 2012, in order to regulate its rare earth enterprises, China has introduced the following rare earth industrial policies:

▲ The “Supporting Key Areas for Adjusting and Upgrading the Rare Earths Industry” published by the Ministry of Industry and Information Technology (MIIT) (1/31/12).

▲ The Working Plan on New Materials Industry for the “12th Five-year Plan” published by the Ministry of Industry and Information Technology (MIIT) to promote industrial structural adjustment and optimization and changing the mode of economic development. It forecasts a huge domestic market demand for rare earth industry (2/21/12).

▲ The “China Rare Earth Industry Association” (ACREI) was founded with official approval in Beijing to play an important role in promoting self-discipline in the industry, regulating the industrial order, and proactively pursuing international cooperation and exchanges, among other functions (4/8/12).

▲  The ”Announcement of the State Administration of Taxation on Issues Concerning Management of the Project, including the Invoices Issued by Rare Earth Enterprises into the Chinese Character Anti-counterfeit Control System on Value-added Tax Invoices” was introduced by the State Administration of Taxation to curb illegal mining and production of the metals (5/22/12).

▲  The white paper “Situation and Policies of China’s Rare Earth Industry” published by the State Council Information Office stated that the Chinese Government will enhance the regulation of rare earth mining, production and export while ensuring the supply of rare earths to the international market (6/20/12).

▲  The “Provisional Measures on the Indicative Production Plan for Rare Earths”, which imposes strict control over the indicators for rare earth mining and production. It also sets quotas for imports and exports, aiming to eliminate obsolete production capacity and advance industry consolidation within the rare earth sector (6/28/12).

▲  The central government plans to set up a state-level and large-scale rare earths conglomerate to back a strategic resources inventory base for ion-type rare earths. It also plans to research the set-up of a rare metals futures trading center in Ganzhou, Jiangxi province(7/5/12).

▲  The “Rare Earth Industry Access Conditions” was released by Ministry of Industry and Information Technology (MIIT) to promote the structural adjustment and upgrading of the rare earth industry, regulating its production and operations, further enhancing the concentration of the rare earth industry (8/6/12).

▲  The Baotou Rare-Earth Products Exchange was established on August 8, 2012 by 10 of the country’s major rare earth producers and institutions which jointly launched the platform with a total investment of 100 million Yuan ($15.87 million). Each shareholder invested 10 million Yuan and holds a 10% stake in the exchange in Baotou in north China’s autonomous region of Inner Mongolia. However, the launch of the REE trading platform has been delayed until 2013. The exchange will be a way of adding “transparency, visibility and consistency” to the rare earth market (8/8/12).

▲  On September 13, 2012, the Chinese Ministry of Land and Resources announced a list of rare earth mineral prospecting and mining rights to reduce its mining right licenses from 113 to 67, a decrease of 40%. It aims, through the integration of the cleaning of rare earth exploration and mining rights to realize the strictly total rare earth control targets (9/13/12).

▲  The “Measures for the Management of the Special Fund for the Adjustments and Upgrades of Rare Earths Industry” was published by the Ministry of Finance (MOF) and MIIT on November 21, 2012 in order to crackdown on illegal mining, eliminating outmoded industrial production methods, enterprises’ facility upgrading for higher environmental standards, promoting the research and development and high-tech applications, reducing excess production capacity and upgrading technology in key enterprises (11/21/12).

▲  China’s Ministry of Environmental Protection has published three lists comprising a total of 80 enterprises that meet environmental protection standards. China’s Ministry of Industry and Information Technology (MIIT) has published three lists of a total of 35 enterprises that meet the Rare Earth Industry Access Conditions in 2012.

Despite the introduction of a series of new rare earth industry new policies, the entry barriers of the rare earth sector have been raised. Multiple rare earth stockpiling plans have also been implemented by the Chinese government, and yet rare earth prices have dropped sharply over the past year. What happened? There are still serious issues plaguing rare earths production in China. There is illegal rare earth mining, producing, trading and smuggling. An oversupply of rare earths has directly resulted in more Chinese firms having to halt rare earth operations. Moreover, the benefits of local protectionism have resulted in an inadequate execution policy.

China’s rare earths annual conference discussed the joint supervision system for the exploitation of industrial rare earths on December 11, 2012. Wang Min, Deputy Minister for Land and Resources, said that the government would be consolidating existing achievements while continuing to address the fundamental problem of the rare earth industry in order to improve related regulations. Therefore, prospects for China’s rare earth industry policies will continue to remain very strong in 2013.



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