Following a quiet start to the year
for rare earths (RE), leading newcomer to the industry US-based
Molycorp Inc. signed a definitive agreement to buy the
processing firm Neo Material Technologies Inc. for Canadian
dollar C$1.3bn ($1.31bn) in March.
The value-added production
capabilities brought by Neo Material, now called Molycorp
Canada, gave a significant boost to overall revenue, Molycorp
said later in the year.
In April, a meeting organised in
London by independent research foundation Chatham House
discussed establishing a code of conduct for rare earths buyers
and sellers to reduce the risk of being held to ransom by
China.
The proposed purchasing code stated
that no buyer should have a supply reliance on one country in
excess of 40%, a move that would “force
diversification,” the meeting heard.
Participants also issued a
four-year warning for RE, stating that if supply was not
sustainable within that time, influential buyers would phase
out the minerals from their current markets.
China and US step-up
rare earths
policies
June saw the clearest statement to
date on China’s rare earths policy, with the introduction
of an invoice system followed by the release of a White Paper
by its State Council.
The document covered development
targets, environmental protection, technological advancement
and international trade policies for the rare earths
sector.
Su Bo, China’s vice minister,
told a press conference that the country could no longer
sustain the resource depletion and associated pollution caused
by rare earths mining, and that China would work to conserve
its resources for future value-added applications within its
own borders.
In July, China blocked the
establishment of a disputes panel under the World Trade
Organisation (WTO) by Japan, the US and EU to contest its rare
earths export controls. It then cut the number of rare earths
mining rights in the country by half to 65.
The aggressive tightening of
China’s rare earths policy helped fuel interest in
proposed US legislation to establish a secure supply chain for
strategic minerals, including rare earths, which was also
launched in July.
The substitute amendment to the
Critical Minerals Policy Act 2011 (S 1113) sought for the
designation and preservation of minerals deemed as critical to
key US industries.
In August, China launched its rare
earths trading platform in Baotou, northern China, under the
name Baotou Rare Earth Product Exchange Co. Ltd, and involved
some of China’s most significant rare earths companies in
trading negotiations to assist transparency and moderate price
volatility.
Several large producers from
southern China were not included in the exchange, and some
market participants expressed doubts over the effectiveness of
the exchange in reforming China’s ill-disciplined rare
earths market.
Later that month, China raised its
export quota for rare earths from around 30,000 tonnes rare
earth oxides to 31,965 tonnes in the first increase since 2005,
although the significance of this was questioned given that
China did not meet its official export quota for rare earths in
2011, exporting only 18,600 tonnes of a permitted 30,000.
Rounding off a busy month for rare
earths came the news that Molycorp had begun processing rare
earths at its Project Phoenix facility in California, US.
The commencement of operations came
as a welcome relief to the integrated miner, which had reported
losses of $67.6m, or $0.71/share, for Q2, had its credit rating
downgraded and raised fears over cashflow.
Molycorp’s losses narrowed
drastically to $0.19/ share in Q3 as sales increased and rare
earths demand stabilised. This was overshadowed by news that
previous disclosures by the company were to be investigated by
the US Securities Exchange.
China’s Ministry of Land and
Resources reduced the number of rare earths mining licences by
more than 40% to 67 from 113 in September, fuelling speculation
that the measure was yet another move aimed at boosting
consolidation of Chinese rare earths supply.
Troubles faced
In October, investigative reporters
from the Chinese news service Economic Information
Daily revealed the extent of China’s rare earths
black market, from mining and refining, to illegal sales and
smuggling.
Rare earths companies that had
previously been forced to shut by regulators had reportedly
moved to new provinces with looser regulation, including Gansu,
Shandong, Zhejiang, Henan and Guangdong, where they had revived
their operations on a vast scale.
The difficulties faced by
China’s rare earths industry were further highlighted when
the country’s largest producer, Baotou Steel Rare Earths
Hi-Tech, announced a 90%-drop in profits for Q3 2012.
This was particularly significant
as the company had seen profits soar 149% to Chinese renminbi
(Rmb) 1.21bn ($190m) in Q1, and was indicative of the
industry’s abrupt change of fortune.
November saw the long-awaited
commencement of operations at Lynas Corp.’s advanced
materials plant (LAMP) in Kuantan, Malaysia.
The refinery was initially approved
in January, but faced a succession of legal challenges from
local residents and protest groups, which claimed that the
plant was unsafe.
The first kiln feed was delivered
to the plant in late November, but the company faced the
prospect of further opposition as fresh legal challenges were
mounted by residents in December.
November also saw the global rare
earths industry assemble the 8th Rare Earths
Conference in Hong Kong.
In the medium to long term, the
rare earths industry is expecting to benefit from swelling
demand from the electronics and renewable energy industries,
much of which will be focused on China and the Asia-Pacific
region, delegates heard.
Entrance to the market would remain
difficult for new suppliers in the more immediate future, as
the sharp decline in prices makes many start-up projects
unsustainable.
Price instability, which has
characterised the rare earths market since 2010, has also led
many rare earths users to seek substitutes, conference
participants said, meaning that the demand base of the industry
could shift significantly in the coming years.
In December, China’s Ministry
of Commerce released a list of conditions domestic rare earths
producers must meet to be eligible for export quotas in
2013.
These conditions included requirements for an uninterrupted
export history from 2009 to 2011, no previous record of
regulatory violation and strict compliance with environmental
legislation.