China’s Ministry of Land and Resources announced on March 31 that the country’s total production of rare earth oxide will be capped at 93.8kt this year.

The total still represents an increase of 5% over last year’s cap, although the government is highly concerned about serious resource drain and environmental damage as a result of rampant illegal mining.

The production of light rare earth is capped at 80.4kt, and that of middle and heavy rare earths at 13.4kt.

Rare earth metals such as Neodymium are becoming increasingly important with the development of more efficient electric vehicles as they are required to make powerful permanent high density magnet composites (HDMC). A typical electric automobile will contain over 1kg of this metal.

China presently has a near monopoly on 'Rare' Earth minerals 90% of which come from there. China reduced exports of these metals by 40% in 2009

In another development, the resource taxes on the mining of rare earth elements were raised from RMB 30/t to RMB 60/t, and from RMB 0.5/t to RMB 3/t, effective April 1, for light rare earths and middle to heavy respectively.

The increase in resource tax is yet another attempt by the government to protect the domestic rare earth resources, following the cap on mine production, the reduction of export quota and the hike in export taxes on some rare earth products. In 2009, the export quota was reduced 40%.

The move may give a further boost to rare earth prices which have almost doubled since last year.

China’s rare earth reserves stand at merely 27Mt at present, accounting for roughly 30% of the world total, down from a high of over 70% in the past. At current production rate, the country’s middle and heavy rare earth reserves could merely support 15 to 20 years, and China will highly likely turn from exporter to importer in the future.

Source: China Metals e-mail