SHANGHAI, Dec. 13 (SMM) - China announced last week to launch crackdowns against illegal activities in the rare earth industry from December 2016 under cooperation of eight relevant ministries.
What’s impact on China’s rare earth market from the inspections?
The crackdowns, to last for 5 months, cover 379 enterprises in 23 provinces, and 180 of them engaged in mining, production, trading and exports will undergo stringent inspections. Detail list of inspected enterprises will be released. The round of crackdowns is said to be the longest and strictest one in history.
The latest crackdowns have raised market long sentiment, SMM survey finds. Some market players expressed their optimism, believing that the crackdowns against illegal activities in the sector will reduce spot supply, especially for medium and heavy rare earth products, facing rampant illegal mining. But, some also doubted about it and said that rare earth market, different from base metal market, is determined by supply. And crackdowns only, which proved several times to slightly influence volumes trading in the market and supply declines, will not exert a good effect unless with support from stockpiling and improvement in market fundamentals.
So far, no news is heard about restarting negotiations on SRB’s stockpiling after being postponed in mid year at official bidding conference with four major participating companies, despite reports of internal discussion, asking for financial support from the Ministry of Finance, and etc.
The round of crackdowns is not expected to influence qualified enterprises much but will exert a big impact on illegal mining, separation, smelting, trading and exporting, SMM says. As illegal supply accounts for 1/3 of total supply, spot supply in domestic rare earth market will drop gradually, and this will bolster up prices, and profits at qualified producers will improve as a result.