China announced further limits on its Rare Earth exports today. The country controls 97 percent of the world’s supply, which are critical for hi-tech products, including smart phones, hybrid and electric vehicles, and cruise missiles. Hard to read if this is retaliation for the US Trade Representative’s action last Friday. We certainly hope not and markets are not priced for such an escalation in trade tensions. This is a story that needs to be closely monitored. The Rare Earth stocks, Molycorp (MCP) and Rare Earth Elements (REE), are up big over the two days. The Wall Street Journal reports,
Chinese officials are signaling plans to further reduce rare-earth exports next year, sustaining its controls of the metals—key ingredients in high-technology batteries and defense products—that have already severely frustrated foreign governments.
“Reducing the export quotas is under consideration, but it’s too early to talk about any reduction rate,” Lin Donglu, secretary general of the Chinese Society of Rare Earths, told Dow Jones Newswires on Tuesday. The state-run English-language China Daily on Tuesday quoted an unnamed Commerce Ministry official suggesting that cuts of as much as 30% from already-trimmed 2010 levels are possible. A Commerce Ministry official declined to confirm the report and the ministry didn’t reply to faxed questions Tuesday.