IRJ - June 21 - Rapid development of China’s industry has resulted in excessive exploitation of rare earth resources in the country and the government is set to tighten policy, according to the Information Office of the State Council, which released the first white paper on rare earths in China Daily.
China supplies over 90 per cent of the global market’s rare earth needs from just 23 per cent of the world’s total reserves. But after 50 years of excessive mining, reserves are declining and the outlook for secure supply is growing dim.
“Rare” earths is a bit of a misnomer as the 17 minerals are commonly found throughout the world. The minerals are used in products such as hybrid cars, weapons, flat-screen TVs, mobile phones and camera lenses.
Fairfax analyst John Meyer explains that China’s aim seems to be to stock some rare earths that are in oversupply as well as those that are of critical importance for economic and military activity.
“Stockpiling REEs is effectively a subsidy for the production of lower grade and rarer heavy rare earth elements (HREEs) where the production of these metals may be marginal due to the inability to sell production of more common REE elements,” he noted.
Still, there is little doubt among experts that environmental degradation associated with REE mining was an important part of the state decision to scrutinise the industry as was the recognition that smuggling out of China to competitors is an issue.
In the white paper, China’s Cabinet warns that “the state will implement stricter standards for ecological protection and protective exploitation policies concerning rare earth resources, improve relevant laws and regulations on the industry’s administration and crack down on all violations of laws and regulations”.
But whether or not this will result in a boost for rare earth explorers is still in question, says Jack Lifton, co-founding principal of Technology Metals Research.
Both Meyer and Lifton agree that adherence to even basic environmental and safety standards in China will raise REE production costs significantly. Linton adds that there are also bureaucratic barriers for foreign companies trying to work with China, impeding progress in the industry as a whole.
Outside of China, production forecasts show Molycorp’s California mine and Australian miner Lynas well in the lead - shares in both companies rallied immediately after China’s white paper release.
But these two projects coming on-line in the next couple of years won’t be enough. In particular, Lifton notes that light rare earth element neodymium, a key element in strong permanent magnets, and heavy rare earth dysprosium, used in laser materials and commercial lighting, will be in short supply while promising deposits around the world face tremendous funding challenges for billion-dollar project costs.