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Why does China's rare earth sell so cheaply?
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14:15, September 07, 2009

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Although China has more than 50% of global reserves of rare earth resources, and accounts for 90% of global market share, the reality is that from 1990 to 2005, China's export volume of rare earth increased by nearly 10 times, while the average price fell to half the 1990 price. Some people believe that foreign trade of China's rare earth is a complete business failure. China's rare earth is "under bought."

Vice-Minister Miao Wei of the Ministry of Industry and Information Technology, said after nearly 60 years of scientific and technological research and development, China has become the world's largest rare earth resources, production and exporting country, but this does not mean that China can control the supply lifeline of the world's rare earth.

China's total reserves and production scale of rare earth ranks first in the world, why it does not have the power to control world prices?

Academician Xu Guangxian from the Chinese Academy of Sciences briefly outlines the development path of China's rare earth industry, which clearly reveals the reason for rare-earth's being sold cheaply.

In 1990s, China's output of high purity rare earth accounts for 90% of the world's total. Due to weak awareness of intellectual property protection in China's technology and business community, the separation technology which was originally applied only in three giant state-owned rare-earth companies in Baotou, Shanghai and the Pearl River quickly spread to local and private enterprises. Dozens of factories were set up and production capacity grew to as much as 120,000 to 150,000 tons, far greater than the world's demand of 100,000 tons, resulting in oversupply, thus rare-earth prices have been artificially lowered. China's rare earth industry is facing a non-profit dilemma.

To solve this problem, honorary chairman of the Chinese Society of Rare Earths Zhou Chuandian, rare-earth team leader academician Li Dongying at the National Development and Reform Commission and other rare-earth experts have repeatedly called for the rare-earth industry to self-limit output and raise prices.

In 2005 and 2006, rare-earth experts proposed to the State Council twice and Premier Wen gave rapid instructions. From 2007, the Ministry of Land and Resources restricted the rare earth production to 80,000 tons, less than the world's 100, 000 tons demand.

When the news was released, rare-earth prices witnessed a 1-3 times increase from 2006, and remained high in 2007. But between 1995 and 2005, Japan, South Korea, and other countries acquired enough low-cost high quality rare earth for 20 years.

According to Xu, due to the global financial crisis, starting in 2008, the price of rare earth once again fell very sharply. But the even more important reason is that Japan and other countries now have rare earth reserves, these countries contribute to increasing availability of rare earths therefore taking some pricing power.

In recent years, sales of China's rare earth are in chaos. The manufacturers lower prices to compete with each other and this disrupts the rare earth raw material market.

"In the export trade, companies have to accept whatever price the foreign buyers offer, meaning precious rare earths are sold quite cheaply," Assistant Director An Sihu at Baotou Rare Earth Hi-tech Zone Administrative Committee said.

By People's Daily Online

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