From The Jack Lifton Report:
I’m in Shanghai at the CLSA China Forum 2010, and I just saw this story, ”Baotou Rare Earth Kicks off Reservation Plan,” on a locally produced web news site in English translation.
It basically states that China’s largest producer of rare earths, which is identified as Baotou Rare Earths, is going to build a stockpile of 300,000 tonnes of rare earth ore concentrates over the next three years.
The story denies that this is a government mandated but does say that Chinese “experts’ are divided among themselves on the value and the meaning of this move. Some think it reflects a government interest in building a strategic stockpile and others say it is to make sure that prices of the rare earths continue to be set by China even if foreign production should occur.
I want to contribute for my readers a third even more plausible explanation. I think that the rare earth mining industry in China is now facing a large environmental cleanup program; the Chinese government has decreed a halt to new mining projects including expansion of existing operations until 2015 or until environmental pollution due to a history of mining for volume without regard to environmental consequences has been “remediated.” This can take years and huge amounts of money. But, in any case, there is already too much dependence on this mining at many stages in the supply chain for components and finished goods, and simply stopping mining during the “clean up” and restructuring, which would be normal at some point, could well be an economic disaster for China.
I think that Baotou is building a large stockpile in anticipation of a supply interruption to be caused by the clean up and restructuring of the mining industry in general and the rare earth mining sector in particular....MORE
Which linked to an earlier post "With a Name Like Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., it has to be good ( 600111:Shanghai)".
