Shares of Chinese rare earth producers rise after new regulations

Shares of China Northern Rare Earth Group High-Tech, China Rare Earth Resources and Technology, Rising Nonferrous Metals Share and Shenghe Resources Holding rose 4.8%, 4.1%, 1.8% and 0.5%, respectively.

The regulations are consistent with draft regulations from early 2021, with changes including removing previous language that rare earth smelters and separators could use imported supplies in addition to their allocated supply quotas.

“We believe there may be further control over the smelting and separation of imported ore,” Sinolink Securities said in a note.

China is the world’s largest producer of rare earth elements and has taken various measures to tighten governance of the industry, even as Western countries seek to transform their supply chains to reduce reliance on supplies from China.

Some industry players said they wanted more clarity on the new rules.

“For now, we can say it won’t have a major impact on international business, but it’s hard to say whether it will in the future,” said a foreign rare earth buyer, who asked not to be named because he was not authorized to give media interviews.

“There seems to be a trend that exports will require some sort of special license, but the wording itself doesn’t make it clear enough,” said an analyst who spoke on condition of anonymity because of the sensitivity of the matter.

Another analyst, who also wished to remain anonymous, said the new rules mean that, unlike in 2023, China will likely refrain from issuing a third batch of supply quotas this year.

Ge Honglin, chairman of the China Non-Ferrous Metals Industry Association, said the regulations would reduce industry demand for non-renewable resources, extend mine life and reduce environmental damage.

(Reporting by Beijing Newsroom and Tony Munroe; Editing by Jan Harvey)