Guest contributor Rahul Jalan is a Chennai-based advisor in Rare Earths for Beroe Consulting India Pvt Ltd. Jalan tracks the global rare earth supply chain and analyzes global procurement developments to help develop state-of-the-art procurement solutions for the company. Beroe specializes in providing procurement intelligence and advisories for a broad swath of industries.
Continued from Part One.
By the Numbers
China’s Ministry of Commerce, in its recent announcement, set the first round of export quota allocations to 24,904 tons. It will represent 80 percent of the total export quota for 2012, indicating that the total export quota for 2012 could be 31,130 tons — slightly higher than last year’s allowed quota.
In pursuit of an environmentally friendly economy and safeguarding the country’s natural resources for the future, China’s Ministry of Commerce has imposed a set of rules and regulations for its 2012 export quota.
Confirmed Vs. Provisional
The export quota allocation for 2012 is not applicable for all rare earths; instead, different sets of quotas are allocated for light (LRE) and medium/heavy (M/HRE) rare earths. Moreover, only 80 percent of the export quota is under the “confirmed” quota category and the other 20 percent is under the “provisional” quota category.
The ministry has divided individual rare earth companies into two groups â€“ the first group received confirmed quota allocations, while the second group only received provisional allocations based on its progress towards implementing new pollution control regulations.
Baotou Steel, which accounts for nearly half the world’s rare earth production, has been excluded from the confirmed exporters list for 2012 due to environmental violations. The company is currently included in the provisional quota category and is likely to get the quota if it meets the standards by the end of July 2012.
The Chinese Ministry has also published an algorithm that will be used to assign specific quotas to individual companies.
Both the total volume (50%) and the total value (50%) of exported rare-earth sales for each company during the last three years will be compared to the industry as a whole, before the next round of export allocation in July 2012. The majority of companies placed under the provisional category are Chinese/non-Chinese JV companies, including both rare earth enterprises operated by Rhodia (Baotou Rhodia Rare Earth Company and Liyang Rhodia Rare Earth New Materials Company).
Most companies under the provisional category are rare earth processors. These companies will be keen on implementing all required environmental regulations before the deadline (July 2012), as the domestic Chinese market is not very profitable for them. On the other hand, companies under the confirmed category could produce additional rare earths ahead of time to capture the remaining 20 percent export quota.
Continued in Part Three.