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Molycorp, Inc. Message Board

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      BEIJING--China may further tighten regulations on rare earth exports amid fears that sharply higher prices have led to a surge in rare earth smuggling and the export of byproducts that are not included in current quota restrictions.

      Industry participants said several measures are being discussed, including a proposal to bring more byproducts under quota restrictions and another to have separate quotas for light and heavy rare earths. Rare earths are a group of 17 minerals, widely used in high-technology products such as high-performance magnets, light-emitting diode phosphors, iPads and hybrid cars.

      People familiar with the situation said one of the suggestions being considered is to bring Nd-Fe-B alloys, which contain 30% rare earth minerals, under existing export quotas.

      China, which dominates the global rare earths market with a market share of more than 90%, has already included ferro-alloys containing more than 10% rare earths in export quotas since May, to plug loopholes in the quota system.

      Under the current classification, however, Nd-Fe-B is considered a processed good and not a raw material, leaving it outside the export quota.

      Last year, the government even scrapped the 20% export duty on "rapid setting permanent magnet film," a type of Nd-Fe-B, "to support the development of the permanent magnet industry," while maintaining a 15%-25% tariff on other rare earth metals and products. In the first six months of thiss year, exports of "rapid setting permanent magnet films" totaled 4,867 tons, Customs data showed. Data for the comparable period last year wasn't available.

      Industry insiders have argued that some Nd-Fe-B alloys being exported undergo only minor processing, just to sidestep the quotas.

      "Foreign companies are more willing to import Nd-Fe-B alloy," said an executive with a state-run rare earth processing company. "For example, rapid setting permanent magnet film is more like raw materials as it's just roughly processed."

      While shipments of rare earth byproducts have risen, exporters were able to utilize only about 55% of the export quota for the first half of the year.

      According to Customs data supplied by Hong Kong-based Economic Information & Agency, China exported about 8,000 tons of rare earth ores, metals and compounds in the first half, while the quota for the period was 14,446 tons. Market participants have also blamed smuggling, triggered by export taxes and extremely high prices, as a reason for underutilization of the quota.

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