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INDUSTRY BULLETIN: Chinese Export Quotas for H2 2011... Increased Rare Earth Supply or Not?19.07.2011 | 1:00 Uhr | ABN Newswire
08:24 AEST July 19, 2011 ABN Newswire (C) 2004-2011 Asia Business News PL. All Rights Reserved.
Of further significance, an earlier announcement stated that ferroalloys containing 10% or greater Rare Earths (not previously subject to the export quotas) are now to be included. Lynas Corp., in a press release dated July 15th, estimated that these ferroalloys would account for at least 2,000 tonnes of annual exports, resulting in a minimum 7% reduction in the aggregate amount of rare earths available for export compared to 2010. Link: http://tinyurl.com/64frcwp Export quotas are important if they limit exports. It is Avalon's understanding from market participants that quotas are not being used up and that exports have essentially been falling since 2006 (see chart below), not because of export quotas, but because of the difference between rare earth prices inside China versus outside China. Businesses are moving to China to avoid paying the higher export prices. The Chinese Government has been making great strides in controlling their rare earth business over the last five years, in a very consistent way in order to be able to control and reduce exports. They have concentrated production in the North and the South to a limited number of companies. They have limited foreign ownership in the sector, they have stopped issuing mining licenses, and they have worked to reduce illegal mining. They have imposed export taxes, and not refunded value added tax (VAT) on exports of rare earths. Avalon's view is that the July 14th announcement is a continuation of China's strategy to target 30,000 tonnes as the exports quota for the next five years. However, as pointed out by John Kaiser in his Kaiser Bottom Fish Online (KBFO) commentary on the export quotas published on July 15th, if recent Chinese guidance is accurate on how much production will be shut down this year, then domestic supply in 2012 may only exceed domestic demand by some 6,800 tonnes suggesting potential for a sharp reduction in rare earths available for export next year. After 2016, when a few select rare earth projects outside China will be in production, there will be no need for the Chinese to restrict exports as they will no longer need to export. China's overall rare earth export strategy has not changed and industry outside China still needs new rare earth production from outside China to meet increasing global demand. If you have any comments or questions on this article or the rare earths generally, please do not hesitate to contact Avalon directly at ir@avalonraremetals.com.
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