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      Plight of China's rare earths industry persists

      2012-11-18 10:45 Xinhua     Web Editor: Wang Fan comment

      Su Guixiang used to repair rare earth smelting machines to keep them rumbling, but now that the machines have been idle for over a year, he just wipes off the dust collecting on them and keeps them from rusting.

      Su's company, Longnan Wanbao Rare Earths Co., halted production last October and has remained shuttered ever since due to the strained rare earths ore supply, a sluggish global market and stricter emissions standards.

      Su never expected that the suspension would continue well into 2012 and erode his earnings.

      "I used to be a high earner in the county, with over 3,000 yuan a month, but after production was halted, my salary was halved and I can barely make ends meet," he said. (3,000 yuan is equal to 476.2 U.S. dollars.)

      However, Su still considers himself lucky, as other workers have been laid off and are living on a 600 yuan per month base salary.

      "In the peak period, there were over 200 workers in the company, but now only ten of us are left for facility maintenance," he said.

      Similar situations have plagued dozens of other rare earths companies in the county in east China's Jiangxi Province, where reserves of valuable ionic rare earths abound and the rare earths industry makes up more than 40 percent of local fiscal revenue.

      "The situation is worse than in 2008," when the global downturn dented demand and squeezed rare earths companies' profit margins, said Li Zhuxing, chief of Longnan's rare earths industry management bureau.

      "This time we are talking about an industry-wide production halt as global demand wanes amid the lingering Eurozone debt crisis and sluggish growth in the United States," Li said.

      According to the most recent statistics available, tax revenue paid by the county's rare earths companies plunged 65 percent year on year in the first seven months of this year.

      Guo Chunrong, vice general manager of Ganzhou Huajing Rare-earths New Material Company, expects the industry to continue to dwindle in 2013.

      The sector experienced a roller coaster ride in 2011, with the prices of some rare earths products soaring in June to a level six times higher than earlier in the year, partly as a result of the government strengthening controls on toxic mining and processing by consolidating the rare earths industry.

      However, prices of the 17 minerals widely used in high-tech commodities such as smartphones and hybrid car batteries have tumbled from their dizzying heights since a speculative bubble burst last year.

      Neodymium oxide, used to produce magnet materials, rocketed 12-fold from 118,000 yuan per tonne, the lowest level in 2010, to a peak of over 1.48 million yuan per tonne in July 2011. It has slid to 385,000 yuan per tonne in recent months.

      The price drop has also been also attributed to softening demand amid sluggish global growth and new rare earths production coming online.

      Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China's largest rare earths producer, has asked its subsidiaries to halt production for a month in an effort to turn falling prices around. The decision came one day after a financial report showed that the company's net profit plunged 89.6 percent from one year earlier in the third quarter.

      Nationwide, increasing numbers of companies are following suit.

      Such moves have helped to lift prices of major rare earths products by as much as 20 percent from their lowest levels this month, according to baiinfo.com, a domestic industry information provider.

      However, analysts doubt whether the effect will last, as new output from the U.S. Molycorp and Australia's Lynas Corp. may pressure prices, especially those of light rare earths, which are not as scarce and strategically-important as heavy rare earths.

      To support the sector, Li Zhuxing said the government must unveil more measures to stimulate domestic downstream application industries in order to offset falling export orders.

      Gong Bin, president of Ganzhou Qiandong Rare Earth Group Co., hopes the government will intensify its crackdown on illegal mining and smuggling, issues he said have exacerbated the already troubling situation.

      According to statistics from 2011, the amount of rare earths smuggled out of China was 1.2 times the amount of rare earths legally exported, said Ma Rongzhang, secretary general of the Association of China Rare Earth Industry. This means that nearly 22,320 tonnes of rare earths were smuggled out of China last year.

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