Wednesday, December 29, 2010

China's Rare Earth Quotas:

I'm not aware of too many things
I know what I know if you know what I mean
'What I know', Edie Brickell & the New Bohemians, 1988

I know nothing about Rare Earths, something made plain in the past on these pages and also in the subscription weekly. However, I do know when I'm being fed uninformed bullshit by a whole bunch of people that pretend they're now suddenly experts on REE and this week your humble scribe's NumericalBullshitGeigerCounter™ has been going haywire thanks to the announcement out of China for REE export quotas for the first half of 2011.

Typical BS is on this link from the WSJ, who start with "China Cuts Export Quota on Rare-Earth Metals" and then feed the fear with quotes from those who really, really want you to get worried about supplies and how that superduper US defense system or that superduper Japanese flatscreen is under threat. You can tell just by looking at the phonies The WSJ is getting for quotes that neither interviewee nor interviewer has the first clue about what's really going on. So let's go to the numbers and see a bit about what's been happening with China REE export quotas, starting with this chart.

This shows the six-monthly quotas for REEs since 2009, including the latest one for the first half of 2011. Put simply, they had a lot to ship out in 2009, cut that drastically in 2010 and have pitched for a similar sort of level (slightly lower) this year, but also a level that's much bigger than the second half of 2010 (the bit we're still in). However, dig a little deeper into the figures and you see that the dreaded and fearmongered supply crunch....well, that just isn't gonna happen, folks. Here's the 2009 quota total stacked with the actual amount of REE exported by China in 2009:

2009 quota limit 50,145mt
2009 quota used 26,770mt
2009 excess 23,375mt

Yup, there was a quota limit, but in the end the amount exported by China to feed that overwhelming world demand didn't even get close. So since then the Chinese have been working the demand to their favour without choking off supply to those who need these REEs (and before we continue, let's note that 45% of all REE exports out of China are of one REE, Lanthanum (La) a fact that skews any fearmonger's supply/demand idiocy even further out of shape) by keeping quota limits to where world demand is pitching itself...after all, if you own 97% of all the REE out there you're not going to let anyone else start hoarding it, are you?

In essence, what China is doing is sticking to its own policy of keeping REEs inside China and promoting the construction of Rare Metals applications factories inside the country. It's using its near-monopoly on REEs to promote its own economy, but what it isn't doing is choking off world supply and harming other country economy; it's letting out enough REE for the rest of the world, but no more than that. when the 2h11 quota comes around, we'll see China adjusting its export quota, up or down, as a function of the actual exports and demand (and prices) seen in 1h11. So apologies to those who like to drum up hype and/or blame China for their own shortcomings, but you're talking out your butts....again.