SHANGHAI—Prices for rare-earth metals continue to soar despite the prospect of short-term market disruption from the disasters in Japan, the No. 1 global importer.
China's exports of rare earths in the first two months of 2011 came to 7,084 metric tons, according to data published Tuesday by Hong Kong-based Economic Information & Agency, which publishes statistics it gets from China's General Administration of Customs. That is up just 0.3% from the first two months of 2010 but about half of what Beijing said would be permitted for sale overseas in the first six months of 2011. And at an average price of $44,361 a ton, the price was almost double last year's average of $23,603 and many times the price paid in the first two months of 2010. And the average price for eight rare-earth metals tracked by Australia's Lynas Corp. was holding Monday at 91% above the year-end level.
Lanthanum going into molds at Jinyuan Co.'s smelter in China's Inner Mongolia
But events in Japan have become another major focus for the rare-earth industry. The elements are used in a range of products turned out by the world's No. 3 economy—including cars, which have cerium in their glass, lanthanum in their batteries and neodymium in their electronics. Sustained factory closures in Japan could pinch demand from the country, whose aggressive buying in recent years has reflected concern Beijing's policies could make some materials unobtainable.
The earthquake knocked share prices lower for some prospecting companies, reflecting concerns that any disruption in Japanese demand would hurt rare-earth prices and make already risky mines more difficult to finance.
A correction was already underway before the earthquake, after a huge 2010 rally in major miners: Shares of U.S. producer Molycorp Inc. are off about 10% this year while Lynas is down 2.9%. Shares in China's big producer,Shanghai-listedInner Mongolia Baotou Steel Rare Earth, however, are up around 17%.
So far, market analysts say evidence suggests any disruption in Japan's demand will be limited. Indeed, some argue Japan's post-earthquake nuclear crisis could spark extra demand for the longer term—for instance, for neodymium magnets used in windmills.
"One could anticipate a positive impact for rare earths, as they are used in green energy," said one Europe-based trader. "It seems to me people will focus more on renewables."
The trader said his Japanese clients indicate they are focused on more than business now, so information is in short supply.
But at least in some cases they are reaffirming orders. "They are not cancelling or delaying," said the trader.
Also shaping global rare-earth trends are rumblings in Washington, where critics of Beijing's export policies are urging retaliation, possibly with a case at the World Trade Organization.
Last week, several U.S. senators said Chinese miners should be barred from investing in the U.S. until rare-earth supplies are guaranteed.
Congressional aides say bills will shortly be introduced that could require the U.S. military to stockpile rare earths.
China set its initial first-half export quota at 14,509 metric tons, and policy makers haven't indicated when they will release a subsequent quota. Last year, exports came to 39,813 metric tons, valued at $940 million. Some analysts expect China to adjust mechanics of the quota, which now applies to all 17 of the elements and may have distorted pricing of some elements.
At the annual meeting of China's legislature earlier this month, Commerce Minister Chen Deming said quotas are needed to protect China's environment, according to the Xinhua news agency, and also urged other countries with prospects to produce rare earths to accelerate their mining-permit process so alternative sources can be developed.
"We are even willing to cooperate with countries like Japan in developing alternatives of rare earth because rare-earth resources are very limited indeed," Mr. Chen said.
—Chiun-Wei Yap in Beijing contributed to this article.
