For China, a Revival Occurs in Rare-Earth Exports
May 23, 2013 (Source: WSJ) — China’s exports of rare-earth metals have rallied in recent months, a trend that analysts attribute to low rare-earth prices and demand from a buoyant Japanese economy.
China’s near-complete control over the world’s supply of the 17 metals, essential in high-technology products including iPhones and missile systems, has strained its global trade ties in the past three years as Beijing has tried to wrest greater pricing control over the raw materials.
Chinese exports last year plummeted 71% from 2011 amid a raft of international trade suits, concerted global attempts to develop alternative rare-earth sources and a world-wide demand lull. Prices collapsed, in some cases—such as for cerium oxide—by as much as 85% between 2011 and the fourth quarter of 2012, according to the industry consultancy Metal Pages.
But trade has quietly ticked back upward this year, with Chinese export volumes rising on a sequential basis each month since February, though prices remain weak. April exports of 2,196 metric tons were almost six times larger by tonnage from a year earlier and a 28% rise from March, according to China customs data this week.
China exported 6,112 tons of rare-earth metals in the first four months of this year, according to the China Customs Statistics Information Center, which uses China government data.
Bargain hunting has led Chinese rare-earth exports to blip upward before, only to peter out within a few months. Because rare earths ship in much smaller volumes compared with other basic commodities, small changes in tonnage can have an outsize impact on trade figures.
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But this time, analysts say, revived demand primarily from Japan, which accounts for two-thirds of China’s rare-earth export market, underpins the recovery.
Japanese companies are buying more as “Japan and China’s economic ties are improving and prices are so low at this point that it’s really helped to boost exports,” said North Square Blue Oak rare-earth analyst Frank Tang.
Japan posted sharp economic growth for the first quarter, as new stimulus policies lifted the country’s gross domestic product to an annualized pace of 3.5%, compared with 1% growth at the end of last year after six months of contraction. The January-to-March rate was also higher than the 2.8% forecast by economists polled in advance by The Wall Street Journal.
The government-backed Japan External Trade Organization in February forecast brighter bilateral trade prospects as a diplomatic row cools over disputed territory between the world’s second- and third-largest economies.
Japanese and European companies are picking up more rare-earth metals now also because their private-sector stockpiles, which typically would last about six months to a year, were increasingly drawn down last year, said Wang Caifeng, vice chairwoman of the China Association of Rare Earth Industry. Makers of computer hard disks, hybrid cars, smartphones and ceramic glass are driving the rising Chinese exports, Mr. Tang said.
“Global demand has conspicuously improved,” Ms. Wang said. “Trade now appears to be returning to normal after we reduced exports last year to tighten environmental requirements.”
Japan’s Ministry of Economy, Trade and Industry didn’t respond immediately to a call for comment. The Beijing office of the Japan Oil, Gas and Metals National Corp., a state-backed organization that helps to manage Japan’s rare-earth stockpiles, also didn’t reply to a query.
The company’s stock rose more than 30% over the past two weeks after it reported better-than-expected earnings for the first quarter. Still, Molycorp said it might be premature to assume a firm turnaround in global demand.
“It’s probably too soon to tell with any significant degree of confidence,” spokesman Jim Sims said. “Inventories have been built up over the past several years, and they are returning to more normal levels now… With the continuing volatility in rare-earth volumes and prices, it is a bit early to conclude that this is the start of a real global recovery of demand or just a temporary spike in demand. But we see these signs as positive.”
Global rare-earth prices remain weak. The value of China’s rare-earth exports for the first four months of this year came in 63% lower than a year earlier, at $136 million, customs said. But the pace of the price slump is slowing from 70%-to-80% declines posted earlier in the year, customs data showed.
The export recovery might signal that China is moving to defend its 95% market share as global producers rev up rival output, Mr. Tang said. Australia’s Lynas Corp.LYC.AU -8.33% has said it began pilot production at a rare-earth processing plant in Malaysia in February. Molycorp is producing about 7,000 tons of rare-earth metals a year.
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