INDUSTRIAL METALS / MINERALS
China to impose rare earths invoice system to curb illegal sales and regulate prices
Mandatory production limits of rare earths have been broken each year due to lack of strict enforcement within China, thus a new invoice system is set to curb overproduction and force speculators to exit the market.
Posted: Tuesday , 01 Nov 2011
MUMBAI - -
In a bid to further curb the rampant illegal production of rare earths, China is all set to introduce specialised invoices for designated rare earths producers this month. Though rumours to that effect have been surfacing all through last month, traders say a decision in this regard has been taken to cushion the fall in rare earth prices and to curb over production.
Traders in China have been caught off guard by a sudden dip in rare earth prices, with the prices of certain minerals plunging over 30% as compared to last month. (see More rare earth companies in China suspending production as prices slide) This has led to many dealers who had accumulated inventories at high prices being thrown off balance. Moreover, prices of rare earths sold without invoices have fallen even further,'' said an analyst tracking the sector.
For example, lanthanum cerium was being sold for $ 34,488 per tonne with invoice, and $ 23,515 per ton without invoice. In Baotou, Inner Mongolia, one dealer who had purchased several thousand tonnes of rare earth carbonate at a price of $ 14,109 per tonne, was said to be desperately seeking buyers. Several rare earth producers are reportedly holding on to their inventories rather than selling them at the current low prices.
Analysts also pointed to the fact that China had set this year's rare earth exploration target at 93,800 tonnes - 80,400 tonnes of light rare earth and 13,400 tonnes of ion-absorbed rare earth, according to a Ministry of Land and Resources' circular. However, that target has already been broken, said an official at China Minmetals Rare Earth Co Ltd.
Some downstream rare earth separating companies have also reportedly stopped buying raw ore because miners cannot offer invoices for over explored minerals.
Mandatory production limits have been broken each year due to lack of strict enforcement, analysts said, and ensuring an invoice system is all set to change that.
China's annual rare earth output exceeded 100,000 tonnes for five consecutive years from 2005 - the planned production quota was 80,000 tonnes per year on average over the same period. Data from the Chinese Society of Rare Earths shows that China produced about 130,000 tonnes of rare earth last year, while the government's target was only 89,200 tonnes.
Analysts also pointed out that the invoice system is set to trigger panic selling by small companies, though output at some small firms in Baotou City has reduced by nearly two-third so far.
They add that the invoices confirm China's efforts to control production and sell-off of the valuable rare earth minerals. Two years ago, China had slashed export quotas even as it closed some of its rare earth processors due to environmental concerns. Analysts add that the invoice system would be an effective measure to regulate the rare earths market and would be in tune with the country's stricter policies to control the valuable minerals.