Molycorp.Inc. (fka MCPIQ)

[RareEarths]

Chinese Statistics on Strategic Metals: Garbage In, Garbage Out
Posted on July 28, 2014 by Christopher Ecclestone
China-StockpileFor decades, or more properly said, centuries China was a land of opacity. Information that came out was often half-true or heavily embroidered. Foreign visitors reported only what they were allowed to see while the apparatchiks of the Imperial (and then Communist) bureaucracy were masters of obfuscation and misinformation.

While China has been viewed as much more open in recent years, the cases involving Rio Tinto and Glaxo SmithKline would suggest it is still dangerous to know too much about certain industries or to seek to know more.

Rare Earths
The one certainty is that China is the largest player by far in Rare Earths with total domination of the space with over 90% market share, however that is where the certainties end. One would naturally think that a market where one country makes up almost the totality or production would be rather easy to read, but instead REEs are one of the most opaque trading spaces on the planets. Price, volume and vendor discovery are akin to searching for a needle in a haystack.

In early 2013, in a piece on the Rare Earth statistic conundrum, Gareth Hatch commented “.. it has been widely reported that the total quantity of rare earths exported from China in 2012 was 16,265 t, per statistics from “Hong Kong-based China Customs Statistics Information Service Center”, with this figure representing “a drop of 3.5% compared to the year before”, i.e. 2011.

Subscribe here to receive free daily InvestorIntel updates
Sign Up
This would mean that the 2011 figure for total rare-earth exports from China was 16,855 t. The problem with that is that last year, the vice-director of the Chinese Ministry of Industry and Information Technology indicated that the figure for 2011 was 18,600 t, and this figure was also widely used and reported by other sources throughout 2012 – even as recently as last month, in the same article that I criticized recently for getting the smuggling numbers wrong.

So, which is it? 16,855 t or 18,600 t? If it is the latter, then the actual drop from 2011 to 2012, assuming that the figure of 16,265 t is accurate ………, (the drop) is closer to 12.6%, not 3.5%, as the newer value being implied for 2011 would suggest”.

The problem here is a combination of factors. Firstly there are the ubiquitous export quotas, then export (and import) duties and finally a desire by the Chinese to control information on the marketplace with muddying of the waters being the rule rather than the exception. There may in fact also be other reasons behind the wave of misinformation in the space. As Gareth mentioned lot of smuggling of Rare Earths has gone on and apparently still goes on. As most of the clandestine mines (particularly those exploiting Ionic Adsorption clays in the south of the country) were shut down three or four years ago (at least so we were all told) then the smuggled material must NOT be coming from backyard operators but instead from the very largest players. Strangely enough these are the anointed “National Champions” for REEs and in some cases have the government as a key shareholder or a symbiotic relationship with the halls of power. So the rising tide of clandestine REEs out of China (much of its exiting through Vietnam) would appear to have quasi-official blessing.

Some stray REEs falling off the back of a truck would not matter too much but in a highly strategic and frankly, highly controversial commodity such as Rare Earths, this issue takes on new significance. We cannot help wondering whether, despite the fanfare, that some degree of tolerance for exploiting the clay deposits may have resurged as they are the best and easiest source of supply of the Heavy Rare Earths within China.

- See more at: http://investorintel.com/rare-earth-intel/china-statistics-strategic-metals-garbage-ingarbage/#sthash.t0s5UjNo.dpuf