Maths can be a difficult thing, even if one has new batteries in his or her favourite Texas Instruments standby.
We here at RareMetalBlog do our level best to provide you with intel and news from accredited and reliable sources.
With that in mind, we filed our own 2012 REE Quota story yesterday (thank you, Graeme Irvine) and provided links to four often-read news sources that weighed in on the issue: the Wall Street Journal, Washington Post, Bloomberg and Reuters.
Consensus of the day is that China’s 2011 export quotas will remain more or less the same in 2012, or, to use various headlines: “unchanged as sales slump,” “almost the same as this year,” “almost level as this year,” or, as a few tried to highlight in a splitting-hairs kind of fashion: “China cuts 2012 rare earths export quota….”
Let’s take another look at the figures, with a little help from industry sources, and start with the unique announcement itself.
This is the first time that the Ministry of Commerce People’s Republic of China (MofCom) has created separate quotes for LREEs and HREEs; there’s no MofComm definition in place for exports here, in terms of putting one rare metal into either category, but it appears that Lanthanum, Cerium, Praseodymium and Neodymium are in the lights category while the heavies (and mediums) category is everything else.
And here’s another first, or at least one that hasn’t been seen for a long time: MofCom said the first-half quota figures represent 80% of what will be the full-year estimate (it has usually stuck with the more conventional and expected 50% figure in the past).
Now, keep in mind what’s happened to the likes of Baotou Steel, which has been precluded from the 2012 export licenses list because of environmental issues at the Bayan Obo mine to date – the issues that need to be remedied before a new license is issued.
The MofCom appears to be towing the line with the political heavyweights linked to this environmental issue – the Ministry of Industry and Information Technology, the National Development and Reform Commission and the Ministry of Environmental Protection.
Unrestricted quotas have gone to producers who have fronted up and passed the environmental assessment process – as well as traders who don’t have outstanding complaints against them.
The quota here is 11,235 tonnes of LREEs and 1,760 HREEs – total: 13,003 tonnes.
This category is important because it includes companies you can invest in.
Case in point: Neo Material Technologies’ Jiangyin Jia Hua Advanced Material Resources (JAMR) joint venture received a 2012 export license.
There is also the reserve (or yet-to-be approved) category here, where companies are waiting for pending environmental approvals.
The figures here? The reserve quota is 17,808 tonnes or 15,745 LREE tonnes and 2,063 HREE tonnes.
And this part is also important from an investment point of view: Neo’s Zibo Jia Hua Advanced Material Resources (ZAMR) joint venture is on the reserve list and has been allocated 1131 tonnes LREE and 142 tonnes HREE.
Okay, big picture time.
If the MofCom is being straightforward on this information, then the total firm and pending (or reserve) quota for the first of half of 2012 is 30,811 tonnes.
Now, if it truly does represent 80% of year’s total quota, then the full-year figure should be about 38,500 tonnes.
Ignore the referenced headlines and stories above – the figure is actually 20% above this year’s quota. (This of course is dependent on the actions of those companies which are waiting for environmental approval and if they actually receive or continue to press for a license going into 2012. Not at all clear if this will happen.)
But, let’s take a breath and remember that, when dealing with China, there’s always going to be a big caveat.
Look at the difference between the tonnage of lights versus the tonnage of heavies that will come out of the country – separated REs that will leave the country in the form of oxides, salts (nitrates, carbonates, chlorides, phosphates, etc), metals, some alloys and compounds. Typical purity here (and, FYI, usually expressed as REO/TREO) is usually 99.5% or higher.
The HREE quota is a pittance compared to the LREE tonnage (roughly speaking: 85/15 lights to heavies). This ratio-minded trend will probably become the norm in the future.
And, if one thinks about the knock-on effect in coming years, western REE companies dependent on competitive LREE production could be in for a tough slog.