June 15, 2011 (Source: WSJ) — China plans to set up a strategic reserve for heavy rare earths in what would be another step towards protecting key resources and ensuring supplies for the domestic market, people with direct knowledge of the plan said.
The plan, which hasn’t yet received final government approval, would likely reduce volumes for export and boost rare earth prices.
It also would follow an approval in 2009 to build strategic reserves of light rare earths in China’s Inner Mongolian Autonomous Region. That plan is supposed to be undertaken by Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-Tech Co. (600111.SH), the country’s largest rare-earth producer by output.
China has started research and preparation for the latest plan, according to the people, who declined to be named due to the sensitivity of the issue.
The stockpiling of heavy rare earths would be led by big state-owned companies and implemented on a national basis, generally repeating the formula used for the light rare-earth reserves, the people said.
“Hopefully the plan will be finalized this year,” one of them said.
Rare earths, comprising 17 elements, are a key material for making many high-tech products and are generally classified as heavy–or ion-absorbed–and light. Heavy rare earths are found mostly in the southern Chinese provinces of Jiangsu, Fujian and Guangdong while light rare earths are largely found in Inner Mongolia.
According to a statement issued by Baotou Rare Earth in 2009, the Inner Mongolian regional government and the Baotou municipal government would each chip in CNY10 million to subsidize the reserve stockpiling. The remaining funds would come from Baotou Iron & Steel (Group) Co., although further details weren’t disclosed.
China is considering a plan to allocate a large amount of capital to subsidize companies that store up heavy rare earth resources, one of the people said. He didn’t specify the exact amount.