Rare earth: Why China buys en masse?

Author: Clemens Narrow

China is the world's largest producer of rare earths and now buys less from themselves huge amounts of metals from. What's behind it?

The Chinese have a market share of 90% for rare earths. So they lack not the metals, which are strictly necessary for the production in the technology sector. Nevertheless, the metals are now stockpiled. The State Reserve Bureau recently bought 10.000 Tons to. The SRB is also responsible for the management of strategic resources. These include not only raw materials, China can foster self-, but also other commodities, the need to import it. The SRB announced e.g.. End 2013 an, that they in 2014 plan, up to 300.000 Tonnes of copper and 100.000-150.000 To buy tons of nickel. Meaning of purchases and storage is to avoid a shortage or if necessary. to compensate for excessive market prices. This does not always work well. The organization also much traded commodities, not only bought and stored. 2005 had a dealer of SRB 200 My. USD to taking a short position on copper in the sand.

Meanwhile, the SRB is less than traders known, but mainly as a buyer. For Rare earth be for months warehouses built. The state-controlled company Baotou Steel Rare-Earth supposedly up to 100.000 Can store tons of metals. So far, the rumors were especially, temporarily impacted on the price of metals. Eventually, the market did not take more seriously the rumors, to it this month actually for the first purchase of 10.000 Tons came. The price of many rare-earth attracted much. That leaves a first guess to: the rare earth prices have fallen dramatically since the hype a few years ago. For many producers to promote at the border is to the economy. Even the export quotas have not changed anything. The purchase could therefore be seen as a kind of price support, especially since the SRB to 10% should have paid over market price.

Among the purchased metals are almost all represented – except for cerium and lanthanum. These two metals are particularly common and the production volume is high. Here, China would need to buy much larger quantities, at the cost to press a sustained upward. That they have not done that, could mainly have the basic, that foreign mining companies such as Molycorp promote these two metals. The Chinese would probably bestow reluctant competitors from abroad with higher market prices.

It can also be a very different reason for the purchases. Come rare earths (contrary to its name) quite common, However, the concentration is low. The promotion is costly, particularly in the heavy and somewhat rarer metals. Here it is quite conceivable, that China wants to secure supplies for its own industry in the long term. The heavy rare earths are likely to be actually rare in a few years. The price likely to rise sharply. Chinese companies could then be supplied by the state with cheap supplies, need while foreign companies pay horende prices. That would be the domestic industry an advantage.

Whether you already have to expect over the coming years with declining funding, is unlikely. One theory therefore assumes, that the case against the export quotas at the World Trade Organization could succeed. Should China abolish the quotas, would have only a small influence on prices on low exports. Can starving the Chinese offer then only, is really less when in the market. This is only, if someone buys large quantities. But there is still the odds, why the Chinese should then already now begin to buy?

The intention of China is not entirely clear. Usually they also say not directly, what they achieve with such actions. The move came at a time but now, in the sector in China is forcibly consolidated. 5 large producers are merged into a consolidated. Some of the individual companies had only one utilization of 35%. The purchases could support the price and the company ultimately help in the consolidation. Until the excess capacity are reduced and prices will rise again due to the demand situation, may purchases and therefore higher prices keep some companies afloat. The purchase of rare earths is ultimately an indirect subsidization of a sector, has too much capacity and would be without price start-up and consolidation facing serious solvency problems.

It can not be said with certainty, that this is the reason for engaging in the market. Unexpectedly, however, would not.

Those: http://www.godmode-trader.de/artikel/seltene-earth-why-buy-china-masse,3868816

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