Shares of Chinese rare earth producers surge after new rules

Shares of Chinese rare earth producers rise after new regulations are introduced

BEIJING, July 1 (Reuters) –Shares of China’s biggest rare earth producers rose on Monday after Beijing announced regulations aimed at protecting supplies of strategic minerals in the interest of national security. Parts of the market felt that this move could potentially reduce supply.

This regulationsissued Saturday by China’s State Council, or cabinet, takes effect Oct. 1 and says rare earth resources — a group of 17 minerals used in products ranging from magnets in electric vehicles to consumer electronics — belong to the state.

Shares in China Northern Rare Earth Group High-Tech 600111.SSChina Rare Earth Resources and Technology 000831.SZGrowing Share of Non-Ferrous Metals 600259.SS and Shenghe Resources Holding 600392.SS increased by 4.8%, 4.1%, 1.8% and 0.5%, respectively.

The regulations are consistent with draft regulations from early 2021, with changes including the removal of previous language that rare earth smelting and separation companies can 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 management of the industry, even as Western countries seek to transform their supply chains to reduce dependence on supplies from China.

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

“We can say for now that it will not have a major impact on international operations, but it is difficult to say whether this will be the case in the future,” said a foreign buyer of rare earths, asking 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 did not want to be named, said the new rules mean that, unlike in 2023, China will likely refrain from releasing a third batch amount of deliveries 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 from the Beijing newsroom and Tony Munroe; Editing: Jan Harvey