China to establish strategic rare earth stockpile

Beijing: China may have decided to create a strategic stockpile of rare earth material and is cracking down on illegal exports as part of this long-term strategy.

"We have seen numbers out of China suggesting they want to build a stockpile of 30,000 tonnes and then add 5,000 tonnes a year, (but) we have seen the numbers mentioned as high as 200,000 tonnes of material," said Mark Smith, CEO of US rare earth producer Molycorp Inc in the course of a conference call.

Smith also said China could also become a net importer of rare earth metals by 2015 even as it persists with restrictions on exports and curb illegal domestic production.

China is the world's biggest producer of rare earth materials and produces 97 per cent of global supplies. This near monopoly, should it choose to exercise it, gives it a stranglehold on a range of vital elements used in defence technologies, wind turbines as well as high-tech consumer electronics.

China's continued crackdown on illegal trade is expected to further strain global supplies that are already badly hit by Beijing's decision to slash export quotas for the year, Smith said in the course of a conference call.

According to Smith, about 10,000 tonnes of illegal Chinese exports reached the market in 2010, and that volume would certainly dip further this year.