China tackles rare earth industry reshuffle
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Industry experts expect the Chinese government to launch a series of "detailed rules" to upgrade the rare earth industry after Premier Wen Jiabao announced a five-year policy guideline for the industry on Wednesday.
"It was the first time that the central government had set a timetable to regulate and develop the rare earth industry," said Lai Zhaotian, the deputy secretary general of the Rare Earth Industry Association in Ganzhou City in east China's Jiangxi Province.
He believed the detailed rules would be issued for the improvement of the capability of rare earths regulatory authorities. The move is also meant to consolidate the mining sector and to promote the renovation and utility of rare earth elements.
Premier Wen announced the industry guideline at an executive meeting of the State Council on Wednesday, saying that the government would strive to establish a healthy development of the rare earth industry with appropriate development, rational production, high utilization and technological advancement within five years.
The stock of Baosteel, a major rare earth producer, opened slightly higher at 74.5 yuan per share during Thursday's trading at the Shanghai Stock Exchange. The stock climbed up to 80.20 yuan at its highest level during the day before returning to 74.9 yuan.
Tian Ye, a securities analyst with Rising Securities, said that the policy guideline showed the central government's determination to upgrade the industry. The message would drive up rare earth stocks in the middle and long term.
"The policy guideline can dismiss a lot of market speculation about the industry. I believe that the competitive Chinese rare earth deep-processing and utilizing firms can benefit through the reshuffle," said Gong Bin, board chairman of the Ganzhou Qiandong Rare Earth Group Co. Ltd.
Yang Wanxi, the director of a government-linked rare earth institute in Baotou City in the northern Inner Mongolia Autonomous Region, said that the national policy guideline sent a clear signal that the Chinese government was determined to carry out the rare earth industry reshuffle despite an international clamor that accuses China of 'hoarding' these resources.
Yang expected that the government would further push local governments to sort out mining responsibilities and check illegal mining activities.
He added that although the government's crackdown on illegal mining had showed some improvement over the past years, the industry still has a lot of problems such as the lack of coordination in the regulatory and supervising departments and the redundant and fragmented scientific research bodies that are responsible for technological renovation.
"The rare earth industry regulation and management involves several ministries, which, sometimes, have inconsistency in policy making," he said, adding that the launch of the policy guideline would push for conformity in policy making for the industry.
He said that producers anticipate that the central government's pending announcement of the 2011-2015 national development plan for the rare earth industry would give a clearer view of the industry's pace of growth in the future.
As the world's largest rare earth producer and exporter, China provides more than 90 percent of global rare earth demand. The country's reserves account for one-third of the world's total.
Surging global demand for rare earth is crucial in the production of components used in a variety of high-tech products such as consumer electronics. The demand had prompted companies in the United States and Australia to start developing or reopening rare earth mines.
