The
Bloomberg news story, reproduced below, outlines China's response denying
what government officials insist are only rumours. Regardless of whether
the rumours are true, the story highlights the risks associated with
reliance on a sole source of supply for any strategic commodity, which
the REE have certainly become.
1. China bans Japan RE exports - 22 September 2010
by Simon Moores
Ban on rare earths exports in
reaction to vessel capture, Japan traders confirm
China has imposed a total ban on
rare earth exports to Japan as fallout from an incident involving a
collision of fishing vessels reached an industrial level, according
to one of the country's biggest buyers of the minerals.
Rare earth oxide users in Japan have
spoken of serious concern as its primary supplier cut all supply ties.
"The [rare earths ban] rumour
is true.. I thought this problem would be solved soon, but frankly we are
worried," a leading Japanese rare earths trader told IM.
For the whole story click: http://www.indmin.com/Article/2675767/China-bans-Japan-RE-exports.html
Subsequently, Bloomberg (www.bloomberg.com) released the following news
article this morning.
2. China Denies Japan Rare-Earth Ban
Amid Diplomatic Row
By Bloomberg News - Sep 23, 2010 4:39 AM CT
China denied reports it banned the export of
rare earths to Japan in retaliation for the detention of a Chinese
fishing boat captain, threatening supplies of a raw material vital to
hybrid cars, laptops and iPhones.
"China does not have a trade embargo on
rare earth exports to Japan," Ministry of Foreign Trade and
Economics Co-operation spokesman Chen Rongkai said in a telephone
interview today. Industrial Minerals Co. of Australia, an industry
publication and consultancy, first reported the ban yesterday, citing an
unidentified "leading Japanese rare earth buyer."
"The Chinese government has requested
exporters to demonstrate support for the Chinese situation and suspend
exports of rare earths to Japan until the end of the month when the
situation will be reviewed," said Industrial Minerals owner and
former mining executive Dudley Kingsnorth. "It's
very regrettable if we have the effective suspension of commercial
contracts for political reasons."
True or false, the
reports may fuel concerns over China's control of more than 95 percent of
the global supply of rare earths. The U.S. Department of Defense is this
month due to complete a review of its dependency on the minerals for
missile guidance systems, smart bombs and satellites.
Japan and China are
both on national holidays today.
Cut Exports
China cut export
quotas for the minerals by 72 percent for the second half of this year,
citing a shortage of supply for domestic manufacturers. The accusations
of further restrictions to Japan come as Asia's two biggest economies are
embroiled in a diplomatic row over the Sept. 7 detention of the skipper
in waters around a group of uninhabited islets and outcrops about 200
miles (322 kilometers) off the northeast coast of Taiwan.
Chinese Premier Wen Jiabao this week
demanded Japan "immediately and unconditionally" release the
skipper or face retaliatory action. Japan has refused to let him go,
saying that the case is being handled in the country's court system.
China said this week
it had severed senior-level government contacts after Japanese
prosecutors extended the captain's detention until Sept. 29. Japan's
foreign ministry on Sept. 20 said China had revoked an invitation for
1,000 youths to attend the Shanghai World Expo, and ticket sales for two
concerts in the city by pop band SMAP were suspended, Asahi newspaper
reported.
Alternative Supplies
Kingsnorth, who
managed the Mount Weld rare earths project for Ashton Mining of Canada
Inc. for 10 years and has worked for BHP Billiton Ltd., Rio Tinto Group
and Alcoa Inc., said China's actions to restrict trade in rare earths
would only spur buyers to develop alternative supplies.
Rare earths are a
group of chemically similar metallic elements, including lanthanum,
cerium, neodymium and europium. They are used in radar, high-powered
magnets, mini hard-drives in laptop computers, catalytic converters for
vehicles, electric-car batteries and wind turbines. Many are difficult to
substitute with alternatives.
While relatively
abundant in the earth's crust, finding deposits of rare earths
significant enough to mine is less common, the U.S. Geological Survey
says. China, the countries that made up the former Soviet Union and the
U.S. have the largest reserves.
Shipments Capped
China's shipments
will be capped at 7,976 metric tons, down from 28,417 tons for the same
period a year ago, according to data from the Ministry of Commerce on
July 8.
Rising demand for
hybrid cars and music players such as Toyota Motor Corp.'s Prius and
Apple Inc.'s iPod have already driven up demand and prices for rare
earths, even without China's export restrictions.
"Toyota has a
stockpile of the rare earths and minerals used in hybrid cars and
electrics parts, so an embargo is unlikely to affect its production
anytime soon," said Koji Endo, an auto analyst at Advanced Research
Japan in Tokyo. "If China keeps an embargo on sales for more than a
year, Toyota might not be able to produce hybrids." Still, any disruption
to trade may drive prices of the raw material higher, damaging profit, he
said.
Chinese Cuts
The cuts in quotas
have already driven prices "up by anything between 50 and 400
percent," Kingsnorth said.
Shares of
Lynas Corp., the Sydney-based
company that's developing a rare earth mine in Australia, have more than
doubled this year. The stock gained 3.8 percent today to A$1.235. Inner
Mongolia Baotou Steel Rare-Earth Hi-Tech Co., the biggest Chinese
producer, has also more than doubled this year and closed at 64.44 yuan
in Shanghai on Sept. 21.
Lynas plans to bring
its Mount Weld project in Western Australia and processing plant in
Malaysia into production by the third quarter next year. The refinery
would be the first outside of China "in about 50 years,"
Executive Chairman Nicholas Curtis said in an interview last week.
A rare-earth mine in
the U.S., in Mountain Pass, California, that was once the world's
dominant producer, shut down most operations in 2002. Molycorp Inc., which
owns the mine, plans to reopen it this year..
The U.S. military
depends on China for the metals required to build smart bombs,
night-vision goggles and naval radar, according to a report to Congress
obtained by Bloomberg News in April.
China's hold on
global production gives it "market power" against the U.S., the
Government Accountability Office said in the report. The materials are
found in weapons including General Dynamics Corp.'s M1A2 Abrams tank and
Aegis SPY-1 radar made by Lockheed Martin Corp.
Liza Lin in
Shanghai, Jason Scott in Perth and Maki Shiraki in Tokyo.
Editors: Ben Richardson, Mark Williams.
If
you have any comments or questions on this article or the rare earths
generally, please do not hesitate to
contact
the company directly at ir@avalonraremetals.com.
ABOUT
AVALON RARE METALS INC.
Avalon Rare Metals Inc. (TSX:AVL) (OTCQX:AVARF) is a mineral exploration and
development company focused on rare metals deposits in Canada. Its
flagship project, the 100%-owned Nechalacho Deposit, Thor Lake, NWT, is
emerging as one of the largest undeveloped rare earth elements resources
in the world. Its exceptional enrichment in the more valuable 'heavy'
rare earth elements, which are key to enabling advances in clean
technology and other growing high-tech applications, is one of the few potential
sources of these critical elements outside of China, currently the source
of 95% of world supply. Avalon is well funded, has no debt and its work
programs are progressing steadily. Social responsibility and
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