WRAPUP 1-China’s rare earths export cut raises trade concerns

* China cuts first-half 2011 rare earths exports 35 pct

* Move may hit high-tech, automakers

* Sony eyes cutting reliance on Chinese supplies

* China warns against basing half-year quota on full-year
cap

* Shares of Lynas, other Australian and HK rare earth
firms jump

By James Regan

SYDNEY, Dec 29 (BestGrowthStock) – China has raised fresh
international trade concerns after slashing export quotas on
rare earths minerals, risking action from the United States at
the World Trade Organization.

China, which produces about 97 percent of the global
supply of rare earth minerals, cut its export quotas by 35
percent for the first half of 2011 versus a year ago, saying
it wanted to preserve ample reserves, but warned against
basing its total 2011 export quota on the first half figures.

The U.S. Trade Representative’s office was “very
concerned” about China’s export restraints on rare earths and
had raised its concerns with China, a spokeswoman said on
Tuesday.[ID:N28253944]

U.S. makers of high-tech products such as Apple Inc (Read more about Apple stock future.)’s
iPads, along with Japanese companies have been
scrambling to secure reliable supplies of the minerals outside
of China as Beijing steadily reduces export allocations.

Japan’s Sony Corp said China’s move to cut export
quotas was a hindrance to free trade and that it would work to
reduce its reliance on Chinese supplies. [ID:TOE6BS02D]

“At this point in time there is no direct impact on our
company. But further restrictions could lead to a shortage of
supply or rise in costs for related parts and materials,” Sony
said in an email statement in response to questions from
Reuters. “We will watch the situation carefully.”

Sony, maker of Bravia brand flat TVs, Vaio PCs and the
PlayStation 3 videogame console, will look for ways to cut its
use of rare earths, including developing alternative
materials, Sony spokeswoman Ayano Iguchi said.

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For a story on China’s quota cuts, see: [ID:nTOE6BR02A]

For a factbox on how rare earth is used: [ID:nN28256995]

Five facts about rare earth elements: [ID:nN28207547]

For a story on US threatening take China to the WTO see:

[ID:nN23157001]

For a special report on the fight for rare earths, click:

http://r.reuters.com/cyc53q

For an interactive graphic: http://r.reuters.com/xep73q

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

A BOON TO SOME

China’s move, however, came as a shot in the arm for some
companies.

Lynas Corp , which owns the world’s richest known
non-Chinese deposit of rare earths, jumped over 10 percent
even though it will be at least a year before it is capable of
mining any material from a new lode in Australia.

Other rare earths companies, including China Rare Earth
Holding Ltd , Arafura Resources , Alkane
Resources and Greenland Minerals and Energy Ltd
also gained between 8 percent 10 percent.

“Export quotas continue to be a tool for the Chinese
government to limit the export of China’s strategic resource,”

Lynas Executive Chairman Nick Curtis said in a statement.

“The growth in the Chinese domestic market coupled with a
decrease in production of rare earths in China is a likely
cause for the tightening of export regulations,” said Curtis,
whose company is aiming to start production in about a year
and has already forged supply contracts with Japanese traders.

World demand for rare earths at present is about 110,000
tonnes a year, with China accounting for about 75 percent of
total demand with the remainder split between Japan, the
United States and Europe, in descending order.

Demand for rare earths is set to more than double to
250,000 tonnes by 2015, according to industry estimates.

“Concerned parties should not estimate full-year quotas
for rare earth minerals just by looking at the first set of
quotas,” China’s Ministry of Commerce said.

Final quotas will take into account domestic production
and demand both at home and abroad, according to the ministry.

DEALS FOR SUPPLY

Prices have surged for these minerals, also used in making
fluorescent light bulbs, since authorities in Beijing slashed
their rare earth exports by 40 percent this summer, saying
China needed them for its economic development.

Last week, Hitachi Metals Ltd signed a joint
venture with U.S.-based Molycorp Inc to help ensure a
steady supply — an announcement that sent its shares up 15
percent in a single trading session. [ID:TOE6BK053]

That followed word earlier this month that Sumitomo Corp
agreed to invest $130 million in Molycorp to secure a
seven-year supply of the materials. [ID:nN10286929]

Since debuting in late July at $14, Molycorp’s stock price
has nearly quadrupled.

Molycorp owns a rare-earth mine in Mountain Pass,
California, which is scheduled to resume production next year
after a 10-year hiatus.

Japan’s trade minister, Akihiro Ohata, told reporters on
Tuesday he believed Japan would still be able to secure enough
rare earth supplies in 2011 even after China’s quota cuts, but
said the situation would need further study.

Ohata’s comment was based on the assumption that the
expected amount of imports in the first half of 2011 would be
roughly equal to the average of imports for the first and
second halves of 2010, a spokeswoman for the ministry said.

Hyundai Mobis , South Korea’s top automotive
parts maker and a major supplier to Hyundai Motor ,
said that the quota would have an impact on the two companies,
as rare earth is used in electric motors for hybrid vehicles,
and as Hyundai Motor is increasing its hybrid vehicle sales.

A spokesman for Hyundai Mobis added that the two companies
have been preparing measures to cope with rare earth issues,
including diversifying imports.

(Additional reporting by Nathan Layne and Kiyoshi Takenaka in
TOKYO, Tom Miles and Niu Shuping in BEIJING and Hyun Joo Jin
and Ju-min Park in SEOUL; Editing by Muralikumar
Anantharaman;; [email protected]; +612 9373-1814;
Reuters Messaging: [email protected])

WRAPUP 1-China’s rare earths export cut raises trade concerns