China hikes H1 rare earth output quota as industry grapples with virus

China has raised its output quota for rare earth minerals in the first half of 2020 by 10% from a year earlier, a government notice showed on Wednesday, looking to step up production after a coronavirus outbreak disrupted activity in the sector.

China is the world’s top producer of rare earths, a prized group of 17 elements used in everything from ceramics to consumer electronics. The quotas are typically issued twice a year and closely watched as a supply indicator.

The first rare earth mining output quota for 2020 was set at 66,000 tonnes, equal to 50% of last year’s total allocation

The first rare earth mining output quota for 2020 was set at 66,000 tonnes, equal to 50% of last year’s total allocation of 132,000 tonnes, according to a notice from the Ministry of Natural Resources and the Ministry of Industry and Information Technology.

That is up from 60,000 tonnes for the first half of 2019.

The notice made no mention of a smelting and separation quota for the processing of rare earth ore into material that can be used by manufacturers. The smelting and separation quota is usually issued at the same time as the mining quota and was 57,500 tonnes in the first half of 2019.

China will issue the mining output quota for the second half of 2020 in the second quarter, said the notice, which also gave the first-half tungsten concentrate output quota as 52,500 tonnes. Tungsten is a metal used to harden steel and make cutting tools.

In the wake of the coronavirus outbreak that has killed more than 2,000 people in China, the country’s rare earths sector has been running at only 20% capacity, the Global Times, published by the official People’s Daily newspaper, reported last week.

However, David Merriman, a manager at consultancy Roskill, said disruptions to production are expected around the Lunar New Year holiday, which was extended this year in a bid to contain the spread of the virus.

The outbreak has also hit consumption of rare earths at magnet and catalyst manufacturers, Merriman said. “So whilst supply is being reduced, demand requirements are also being limited,” he added.

Virus-related domestic and international transport restrictions, which are affecting distribution of material to customers and for export, are the main issue facing China’s rare earth industry, Merriman said in an email.

“If this is not resolved within the coming weeks then we would expect supply to become stressed and would likely see a price reaction – though likely to be limited by state stockpile releases,” he added.

(By Min Zhang, Tom Daly and Shivani Singh; Editing by Shri Navaratnam and Simon Cameron-Moore)

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