The China Money Report

China’s rare-earth exports have recently retreated due to weakening overseas demand and the nation may cut export quotas for the precious metals next year, the National Business Daily reported on Wednesday.

Since the beginning of this year, high referential prices set by customs have impacted rare-earth exports as the official guide price is much higher than spot prices, according to Du Shuaibing, an analyst at a local rare-earth information provider.

In September, the average price of neodymium oxide was RMB 1.1 million ($173,000) per tonne in China, but the average export price was RMB 2.1 million a tonne, according to data from commodity information provider 100ppi.com.

China’s rare-earth export quotas would be capped at 30,000 tonnes in 2012 as this year’s quota has not been used up, an industry insider was cited as saying. The nation’s export quotas for rare-earth were set at 30,184 tonnes for this year, but only 12,000 tonnes of rare-earth products were exported in the first 9 months.

He estimated the remaining quota in 2011 would be around 8,000 tonnes, the insider said.

Rare-earth prices are also falling domestically due to sluggish demand, the paper said.

Trade is thin as downstream clients are expecting lower prices, Liu Ruixing, analyst at 100ppi.com, told the paper.

It is likely the central government will cut exports quota next year in view of consumption and international demand, Liu added.

Our view at CMR is that the goverment will cur export quota’s next year. Baosteel who currently controls 87% of global production is buying material on the open market in order to control price. They have also stopped production for one month in order to support price levels.