China is considering rare earth reserve for price stabilization

China is considering rare earth reserve for price stabilization

14.06.2012 Institute for Rare earth and metals – China earlier this month attracted the attention of investors with the notice, that prefer the introduction of a national inventory reserve account, to stabilize rare earth prices.
In another announcement, the Government approved the possible introduction of a new tax, to control the sale and production.

China's domestic demand for rare earth fell in 2011 greatly increased production due to Beijing's control. This resulted in, that include many separate systems had, because customers were not ready, to pay record prices.

Mechanism for free trade

According to local media, the Ministry of Industry and Information Technology to explore the establishment of such reserve and Chinese industrial enterprises to be a rare earth based trading platform based on a free trade mechanism.

Industrial companies are obliged at a certain price decline, To buy rare earths for a fixed set mechanism and retain. If prices rise again on a fixed price level of compound, these industries are required, to sell the rare earths. According to unknown sources, a plan, as function of this system is expected after talks with local rare earth companies.

This system will undoubtedly have an impact on an already troubled market. Some analysts believe, that this approach, the already tense relations between East and West still could become more difficult. The climax of this tension has been achieved, than the U.S., The EU and Japan led the World Trade Organization, in their view, restrictive, objectionable rare earth policy of China.

Lack of transparency

The selected time for these measures may be questionable, However, the concept is not entirely new. According to a report in the Wall Street Journal, The theory is based on the concept of reserve stockpiling, which is used by the Chinese authorities in other areas such as. for copper and grain. In fact, many governments have set up global inventories, to overcome temporary shortages.

Investors are concerned about, that such measures in China in the past, often with very little transparency and virtually created seemed accompanied, To manipulate prices.

Beginning 2011 China's State Council gave similar instruction to promote the rare earth industry and called for the establishment of a strategic reserve. Market participants also pointed to, the largest rare earth producer in the country, Tried Inner Mongolia Baotou Steel Rare-Earth in the past, a similar strategy had failed and was.

China Galaxy Securities, Beijing's biggest brokerage firm, commented, that the dramatic price fluctuations in 2011 the industry 'extremely hurt' and led to increased difficulties in regulating had. She added,, that the reserve mechanism would be helpful, in order to get the price fluctuations and the illegal mining rare earth under control.

Details about the ability of the country, Inventories build, were never made public. China's plans, however, were significantly, as reported by state media, that institutions in the province of Inner Mongolia alone are capable of 39.813 MT to promote rare earth - far more than the sum of the REE, day in China 2011 exported.

Investors will be interesting, whether these measures are a knock-on effect and an increase in production also indicates how this was the case last year, became known as the intention of building a strategic reserve. In this case responded REE companies around the world with a dramatic increase in the reduction of rare earth. Examples include Australia's Lynas Corporation (ASX:LYC) and US-based Molycorp (NYSE:MCP).

Rare earths control permits

Furthermore, investors worried about news from China, that the government intends, to give the manufacturers of rare earth VAT Permits, to regulate the over-production and to take additional tax money. By issuing a certificate of VAT, the government will get complete control over, which companies can export the quantities of rare earths and may not export it

Although it is still unclear, how much will this new tax has already led to this proposed action much criticism. Dealers are confident, that export prices to rise for rare earths in. If this tax is introduced only once, it will be impossible, to avoid them, and the government will strictly control and monitor the whole process of production to allow Sold. Rare earths are reported to be companies in Sichuan and Mongolia, the first, that such approval will.

The coming months will be crucial both for investors and analysts for the. Hardly a week goes by, in China announced no new legislation in a sector, lose the influence it seems to. Although the structure of rare earths is a messy business, seek more and more companies, To close the gap in the market, which the influence of China is increasingly beyond.

Über das Institut für Rare earth and metals e.V.

The Institute for Rare Earths Association . considers itself as a network of contacts , bringing the mining operations, licensing bodies, exploration companies, investors, consumers and government agencies together. , The objective is to counteract against the shortage , of these elements , becoming increasingly, bigger through a variety of export restrictions.. This objective, it is becoming increasingly bigger shortage of these elements through various export restriction contrary to wirken.Weitere information on www.institut-rare-erden.org

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