DJ UPDATE:China Rare Earth Export Value Up Sharply Despite Flat...

DJ UPDATE:China Rare Earth Export Value Up Sharply Despite Flat Volume

BEIJING (Dow Jones)--The value of China's exports of rare earth ores and metals in
the first two months of the year increased by almost seven times, or 568%, to $314.3
million, the semi-official China Customs Statistics published by Hong Kong-based Economic
Information & Agency said.
The rising value reflects the success of China's efforts to force up prices for a
commodity that is crucial in high-technology manufacturing. Although China accounts for
only about a third of known rare earth reserves, it controls more than 95% of global
output and exports now, giving the country an outsized influence on prices.
While Beijing has been widely criticized for its increasingly restrictive export quota
on rare earths with some blaming it for choking supply lines to push geopolitical goals,
the trade data indicate China may be more interested in its declared goal of pushing up
prices of these increasingly important minerals from the rock bottom levels that forced
most non-Chinese producers out of the business.
Latest signs show the government is succeeding in gradually gaining control over
prices.
The higher prices in the first two months have more than offset the very slow growth in
actual export volumes, which inched up just 0.3% on year to 7,084 metric tons, according
to the agency's data. The estimates are based of official customs figures, sourced
from the government.
In January, this trend was even more pronounced, with export value jumping nearly
fivefold, or 376%, from a year earlier while actual volumes declined 29% from January of
last year, to 4,087 tons.
In February alone, China exported 2,976 tons of rare earth ores and metals, valued at
$160 million, according to the CCS data.
Last year, customs data showed China exported 39,813 tons of rare earth, down 9.3% from
2009 -- smaller than the actual volume purported in its export quota policies -- while
the value of those exports tripled.
China has cut its quotas for exports of rare-earth metals for the first half of 2011 by
around 35% on year. In 2010, the government said it had slashed the export quota by about
40% for the full year, although customs data suggest the actual decline in export volume
was much less aggressive.
A steady stream of government and global rhetoric on China's rare earth exports
belies the relatively small size of the industry. China's 2010 rare earth exports
totaled just $939.72 million, about a tenth of what China spends on fuel oil in just one
month.
While China controls most of the 17 elements collectively known as rare earth, it only
possesses about a third of global reserves.
Beijing has long sought more control over prices for these raw materials, aiming to
consolidate mining at home, and match Japan and the U.S. in their strategic rare earth
reserves, the Eurasia Group said last month.
However, the Eurasia Group noted that rising prices may actually backfire on
Beijing's plans.
"Ironically, driving up prices might have the unintended consequence of rallying
local governments and private players to resist consolidation, as they move to protect
resources that are now viewed as more profitable," said Damien Ma, a China analyst
for the consultancy based in Washington, D.C.