Rare Earth Smuggling Still Rife in China

According to Reuters, Su Bo, China’s industry vice minister, told a meeting of rare earth companies last week that illegal behaviour is continuing due to local government protectionism and a failure to implement regulations.

However, a statement on China’s ministry of industry and information technology website says that “local governments have been ordered to crack down harder on illegal activities, and tightened rules for the sector would be released soon,” as per Reuters.

Smuggling has allowed China to skirt export restrictions that previously resulted in cross-the-board price hikes for the 17 rare earth elements used in high-technology applications like smartphones and green energy.

Bo said in May that a black market in rare earths has traded some 40,000 tonnes of the materials in previous years, compared to a total annual export quota of roughly 30,000 tonnes.

Previous crackdowns on mining, processing and smuggling have resulted in higher rare earth prices, and now the Chinese government has taken further steps to control the industry by consolidating the sector (larger companies taking over smaller producers), as Rare Earth Investing News reported.

But in what appears to be a case of “the tail wagging the dog,” current low prices for rare earths may actually be discouraging smuggling. Metal-Pages reported last Thursday that traders in Europe are seeing fewer unsolicited offers for smuggled rare earths from China, but they believe that the lower number of offers is “more the result of rare earths prices falling to levels which do not make smuggling and illegal production so worthwhile, particularly for the lighter elements such as cerium and lanthanum.”

Company news

Commerce Resources (TSXV:CCE) said Friday it has expanded the mineralization at its Ashram rare earth project in Northern Quebec. Reporting results from its 2013 drill program, Commerce said one drill hole returned 61.4 meters of 2.15-percent total rare earth oxides (TREO), while another came back with 57.36 meters of 2.28-percent TREO. The drill program expanded the deposit 60 meters to the northwest, confirmed additional mineralization, and added middle and heavy rare-earth oxide enrichment near surface, the company states in its press release.

Mining Weekly reported that Premier African Minerals (LSE:PREM) is looking to drill its Katete rare earth project in Zimbabwe following the completion of a drilling program at a tungsten project, also in Zimbabwe. “The ongoing trenching at Katete has continued to produce promising results. The company believes that Katete will be the next project to undergo a further drilling programme in addition to the completion of mineralogical and metallurgical testwork and the delineation of a Samrec Code-compliant resource statement during the course of 2014,” Premier African Minerals CEO George Roach said in a statement.

Belgian chemical company Solvay (EBR:SOLB) has won two patent cases against Chinese company HySci (Tianjin) Specialty Materials. According to Business Standard, after a Chinese court found that HySci infringed Solvay’s patents, Solvay was awarded RMB 5.6 million (US$925,456) in damages and HySci was ordered to stop the production and sale of certain rare earth mixed oxides used in autocatalysts.

Prices and market update

Prices for praseodymium/neodymium appear to be the only bright spot in the rare earths market, with most of the key oxides and metals over the past week either seeing a lack of consumer buying or lower prices. According to data from Metal-Pages, 99-percent praseodymium/neodymium oxide is currently changing hands at about RMB 300,000 (US$49,578) a tonne, while the metal is holding at about RMB 390,000/t. ($64,451). The publication said trades for the material have picked up due to consumers keen to restock to meet their needs after the Spring Festival holiday in February.

While Chinese yttrium prices are currently flat, Metal-Pages reported a big increase in exports of yttrium oxide in November. 56,533 kilograms of the material, used for the color red in televisions, was exported that month, a 103.8 percent increase from November of 2012. The primary buyers were Japan, the United States and Russia.

Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.

Related reading:

Is China Setting the Stage for Higher REE Prices

Prices, Quotas and Smugglers: Making Sense of Rare Earths in China