China's rare earth prices go up as the nation takes protective steps

China's rare earth prices rose dramatically in recent months as the nation has taken steps to limit the production and export of the valuable resource, according to a Chinese official.

Starting in second half of 2005, China's rare earth prices began to rise and since some rare earth product prices have doubled in 2006. The age when China's rare earth produces were sold at 'dirt cheap' prices has come to an end.


"The rare earth prices went up dramatically in recent months," said Li Zheng Hong, chairman of Baotou Rare Earth High-tech Administration Commission. "There are a couple of factors behind this price rise."

First, China began to take measures to limit the production and export of rare earth resources in an apparent effort to protect rare earth resources. Jiangxi Province, which has the world largest rare earth deposits, was particularly active in abiding this policy. The province has substantially reduced the rare earth production this year, Li said.

Secondly, China started to reduce export quotas and export tax rebates on rare earth products since last year. China obviously has realized that rare earth products sold a dirt price to foreign country was a foolish business.

In addition, the appreciation of Chinese currency, the rising costs of rare earth production also contributed to the rise of rare prices. On the other hand, China's domestic consumption of rare earth is increasing at a rate of 10% each year, especially the rapid development of rare earth permanent magnets products.

"This is really good for us," said the rare earth official, who has been working in the rare earth industry for decades. "The good rare earth prices help our rare earth businesses make more money, and which can be used in technological development and advancement."

According to Li, who was involved in China.s rare earth policy-making process, China has now changed its rare earth policy. The country longer encourages the exportation of rare earth as raw materials. Instead, China hopes to export high value-added, more advanced rare earth production. The country also hopes to cut down its rare earth export as part of its efforts to protect these resources.

As the world largest rare earth producer, China produced 90% of the whole world's total rare earth output.



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