China's rare earth quotas are a joke. 74% of oxides never left port this year
Chinese authorities have added 10,680 tonnes to the country's export allowance on the top of the 10,546 tonnes it had already allocated to 11 state-sanctioned miners this year.
It is something of a meaningless exercise because during the first quarter China only exported about 2,770 tonnes of rare-earth oxides – 26.3% of the initial quota according to customs data.
Compared to last year that is a 70% drop in demand. The Australian quotes Du Shuaibing of Baichuan, a Beijing rare earth consultancy: "The global market has adopted a cautious, wait-and-see attitude in rare-earth procurement, resulting in weakness upstream and downstream."
China mines roughly 95% of the world's rare earths and is also the globe's top consumer. It said at the start of the year that it will keep the allocation for the entire year at just over 30,000 tonnes.
The country's export restriction on rare earths is currently before the World Trade Organization after the EU, Japan and the US complained, but what promised to be a precedent-setting case about trade with China now looks more like a damp squib.
This has not stopped lawmakers in the US from viewing rare earths – employed in critical components of the automotive, high tech, green energy and defence industries – as a national security issue and the industry worthy of special treatment.
Some have even called into question an official report from the Pentagon that showed that even at the height of China's clampdown US defence contractors never faced a shortage of rare earths.
The slump in prices of REEs is as dramatic as the decline in volumes. Some more abundant rare earth elements such as lanthanum have crashed by more than 70%. While heavy and scarcer REEs such as dysprosium have generally held up better, many have also experienced price declines of 50% or more.
The changing marketplace has also led to a brutal beating of Molycorp, which was once the world's top supplier of REEs and is now restarting mining and processing.
The Colorado company is destined to become the number one producer of the 17 elements outside China, but the rapidly changing economics of the industry has seen its stock decline 20% this week and 74% since May last year.