Is the Molycorp/Neo acquisition in response to this news from China?

99.99999% of Americans will not be attending TREM2012 in Washington, DC, tomorrow (March 13,2012). To be fair it is a “policy” themed conference and is focused on what is best for America, and so it will not be as lively as the TMS2012 held in Toronto two weeks ago, which covered the global rare earths’ industry and had few speakers other than me who would say that keeping America strong was a concern of theirs.

The “policy” mavens (self-confessed movers and shakers) attending TREM2012 probably don’t read The China Daily, the English version of the “semi-official”  newspaper, which in Chinese is named “The [Chinese] Peoples’ Daily.” I hope I am wrong and that they do read it, but if not, I want to reprint it for them and, more importantly,  for you, the reader interested in what is really happening in the rare earth space, the entire article as printed in the English version:

Consolidation to create rare-earth ‘giants’

Updated: 2012-03-12 08:10

By Wu Jiao and Wei Tian (China Daily) — China will establish two or three large rare-earth enterprises by consolidating companies in the sector, said a top industry official on Sunday.

Miao Wei, minister of industry and information technology, said on the sideline of the annual national legislative session that China will retain limits on rare-earth export quotas after the industry rationalization.

Miao said the first large rare-earth enterprise had already been created in the Inner Mongolia autonomous region by consolidating 14 related companies under the leadership of Baotou Steel Rare-Earth Hi-Tech Co.

Miao didn’t give a timetable for the nationwide restructuring, but a statement issued in February last year said that over a five-year period, China would regulate the industry to ensure “reasonable exploration and orderly production”.

Export quotas were introduced to prevent smuggling and illegal exploration in the ill-regulated industry.

Although its rare-earth deposits account for only 35 percent of the world’s total, China remains the world’s largest rare-earth exporter. It accounts for more than 90 percent of global output of the 17 rare-earth metals, which are used in the electronics, defense and renewable energyindustries.

The country said last year it would tighten up regulations on exploration, processing and environmental protection related to rare-earth exports, with officials saying that the move was primarily motivated by environmental concerns and was in compliance with World Trade Organization rules.

According to Miao, after the rationalization, export quotas will be set in accordance with the annual production amount, which is also in line with WTO rules.

Miao said that the rare-earth export quota in 2012 would be the same as in 2011. The full-year quota for 2011 was 30,184 tons, but actual exports amounted to just half of the quota.

Tougher regulations and a halt to illegal exploration meant rare-earth output declined last year and prices rose, leading to a sharp fall in consumption by foreign companies, Miao added.

“It is totally groundless to blame China for not selling or controlling rare-earth exports. The fact is that many foreign firms are cutting their usage,” said Miao.

Miao said the industry regrouping will cover firms in more than 10 provinces, adding that the domestic industry’s value stands at about 40 billion yuan ($6.35 billion).

Li Yizhong, former minister of industry and information technology, who is now a member of the Chinese People’s Political Consultative Conference National Committee, said it’s possible that large groups created in the restructuring might consider transnational operations.

In response to China’s rare-earth regulations, foreign countries are stepping up new policies to cope.

Japan, the world’s biggest importer of rare earths, will provide 5 billion yen ($65 million) in subsidies for projects that reduce the need for the elements as it aims to cut its reliance on imports to meet demand.

The funds will support projects that reduce the consumption of magnetic products that use dysprosium and neodymium, improve recycling and develop new technologies, according to a statement from the Ministry of Economy, Trade and Industry in February.

Apart from rationalizing the upstream segment of the rare-earth industry, it is also the “best time” to develop the downstream end, such as product processing, said Tu Hailing, vice-president of the Chinese Society of Rare Earths.

“For enterprises that made a lot of money from high prices last year, it’s time to reinvest in research and development, to avoid falling to a passive market position again when prices decline,” Tu said.

Tu suggested the government should also involve venture capital to facilitate a combination of financing and technology, as well as special funds to aid technology upgrades.

Tu was confident that these things would happen soon because “a hard lesson was learned from market volatility last year”.

“Only a developed downstream could stabilize market demand and production for the upstream,” Tu said.

These changes could be initiated by an “industrial association of rare earths”, which will be established soon, he added.

Contact the writers at wujiao@chinadaily.com.cn and weitian@ chinadaily.com.cn

(China Daily 03/12/2012 page4)

Please do not comment on Chinese conspiratorial behavior or their attitudes towards the protection of intellectual property. Please do tell me why I should think that an outsider is going to win either  Chinese domestic or Chinese manufactured for export market share in the rare earth space.

As I have believed since the consolidation of the rare earth mining sector was announced last year it was only a matter of time before Beijing decided to rationalize the entire total rare earth supply chain. This is why I believe that Neo sold at the top of its game, because as a Foreign company its future in the Chinese market is uncertain  to be easy or even possible. I think that unless Molycorp can bring Neo’s Pitinga dysprosium project  into production soon it will have no bargaining chip whatsoever to enter or remain in the new Chinese consolidated supply base.