Chinese Rare Earth Exporter Unexpectedly Shuts Down To "Balance Supply and Demand" - HotHardware
Chinese Rare Earth Exporter Unexpectedly Shuts Down To "Balance Supply and Demand"

Chinese Rare Earth Exporter Unexpectedly Shuts Down To "Balance Supply and Demand"

Chalk this one up on the "Who didn't see it coming" meter. Prices for neodymiumoxide and europium oxide have dropped recently, due to falling demand in European and US markets. In response, Baotou Steel, China's largest rare earth producer (China recently consolidated the rare earth production of multiple companies in Inner Mongolia) has announced that it's suspending all operation in a bid to "balance supply and demand." Prices on the two metals have tumbled roughly 35 percent in recent months; Baotou believes a total one month shut down will apparently redress the situation.

China has aggressively nationalized rare earth production in recent years; the WTO ruled in July that the country's actions, export restrictions, and production quotos violated free trade agreements despite China's protests that the actions were necessary to safeguard national resources and protect the environment. Rare earth processing can be quite toxic, and no one seriously argues against the need for environmental and personal safeguards—but completely shutting down production to redress perceived demand imbalances makes no economic sense,



particularly given China's announcement earlier this year that it shut down rare earth production for three months to resolve environmental issues. There's a reason large companies try to avoid total plant closures—it's extremely expensive to do so. Equipment has to be properly stored, furloughed workers still have to be housed, and the fleet of vehicles normally engaged in hauling product to and from the facility has to be reassigned or mothballed. It takes days to properly shut down and weeks to ramp production back to pre-shutdown levels. These factors affect any large processing facility, regardless of its economic or political system. If you want to change the supply side of a supply/demand equation, you reduce production—you don't just stop it.

If you're hoping to create a spike in prices during the Q4 holiday season and right before the Chinese New Year, on the other hand, shutting down production is a great way to do it. China's stranglehold on rare earths has led to spiking costs on a number of products—GE recently testified before the Senate that if the jump in rare earth prices over the past 12 months were applied to a $2 cup of coffee, the $2 mug of Joe in 2010 would currently be running $24.55. GE has been criticized over the rising price of its compact fluorescent lights; CFL prices are up 37 percent this year as of September.

We've recently covered new rare earth finds within the US and the global push to develop alternative supplies as China's export controls have tightened. Current estimates predict most rare earths will be in "permanent surplus with respect to supply" by 2017, with neodymiumoxide hitting that point in 2014 and europium oxide in 2015 or 2016.
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So basically China is trying to be the OPEC of rare earth...

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omegadraco:
So basically China is trying to be the OPEC of rare earth...

No,...not trying,.....

 

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Well at least they're trying to find new deposits within the U.S.A., but I know that china just wants to make as much profit as they can & don't care what they have to do, to do it. Although the greenies will be partly on the Baotau Steels side for a while, until they can get more of what they want for the greenies point of view. So looks like the prices of certain products will go up quite a bit even if those products don't have to that use those rare earth metals.

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The price of Hard drives is already climbing quite a bit if you check it out. That didn't take long at all to manifest itself.

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Yeah! I'll have to agree with you once again, but it is money that makes the world go around.

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