Market Interpretation of Removal of China Rare Earth Export Quotas

SHANGHAI, Jan. 7 (SMM) – China scrapped its rare earth export quota regime in 2015, and companies will be able to export rare earths as long as they secure export license for the materials. How do market players view the new export policy?

Near-term impact to be limited
“In fact, export quotas for rare earths were usually not used up in recently years due to rampant smuggling, so any immediate impact on China’s rare earth exports is not expected,” an analyst with Shanghai Metals Market (SMM) said, “and market focus may shift to the export duty for rare earths now that the export quotas have been removed.”

A majority of market players expect the new policy to help combat rare earth smuggling, though.

As for rare earth price outlook, some market participants hold that the new policy would be a hard hit to rare earth smuggling. That, combined with China’s enhanced efforts in cracking down on illegal rare earth mining operations, are believed to help buoy rare earth prices.

Some others, however, noted that the global economic slowdown is impairing rare earth demand, and the growing supply resulting from the removal of export quota may weigh on rare earth prices in the short term. These players said that price outlook for the long run should be subject to market fundamentals.

What’s the next step?
Citing comments of an official from China Academy of International Trade & Economic Cooperation, a Chinese financial press said that more policies targeting rare earth industry should be soon introduced as a follow-up to the new export policy, including clampdown on illegal mining, stricter entrance requirements, and establishment of rare earth trading exchange. Otherwise, Chinese rare earth prices may still face great pressure.

Many industry insiders also expect the cancelation of export tariff and a reform in resource tax. Although China has decided to leave the export duty in place in its latest release of Tariff Execution Plan 2015, but some legal professionals believed the government may cancel the tariff in response to the World Trade Organization’s ruling earlier.

In addition, some predict that resource tax on rare earths will rise sharply. Earlier reports showed China may impose a 22% ad valorem tax on light rare earths in north China and a 35% tax on ionic rare earths in south China.
 

The article is edited by SMM and is provided for information purpose only. SMM assumes no liability and does not warrant the accuracy, reliability or completeness of information contained or quoted in the article, either express or implied. SMM further disclaims any liability for losses in connection with the information contained or quoted in the article.

For news cooperation, please contact us by email: sallyzhang@smm.cn or service.en@smm.cn.