WASHINGTON (Reuters) - China will lower exports of rare earth metals under quota reductions announced in July, but will not completely cut off supplies to the United States and the European Union, Molycorp Inc Chief Executive Mark Smith said.
“I don’t believe that China is going to completely embargo the United States and the European Union as relates to rare earths,” he told a conference on critical and rare metals in Washington on Tuesday.
“I do believe, however, that we’re going to see reductions in the export quotas coming out of China.”
In a bid to break into the China-dominated market for metals used in high-tech products, Molycorp plans to ramp up its U.S. production to 20,000 tonnes of the minerals a year by the end of 2012, Smith told Reuters Insider Television earlier on Tuesday.
“About one-sixth or so of the market is what we’re looking for,” Smith said, adding that Molycorp plans to break ground on its Mountain Pass, California mine on January 1, 2011.
Molycorp shares rose $2.68, or 8.5 percent, at $34.10 late Tuesday afternoon on the New York Stock Exchange. The company’s shares have more than doubled since Molycorp went public in July.
With China withdrawing some supplies, Molycorp aims to fill the void and become the world’s low-cost producer.
“Our prices should be about 50 percent of what the Chinese are producing at today,” he told Reuters, referring to Molycorp’s lower processing costs.
China, which controls 95 percent of the global trade in rare earth metals, last week denied reports that it had halted shipments to Japan as other countries brace for similar cutbacks in exports of metals used to make energy-efficient lighting, solar cells, wind turbine magnets and electric car batteries.
Smith said export reductions were inevitable as China faces a growing domestic demand and looks to expand its own clean energy sector [ID:nTOE69606G].
“They have no choice but to continue to reduce the export quota,” he said.
Smith said he doesn’t view China as its most significant competition and hopes to churn out a high volume of rare earths from it new California mine.
But even if Molycorp helps diversify the world’s source of rare metals, Smith forecast that the price of minerals would remain high for a while under the pressure of growing demand and lingering tight supply.
“That is a recipe for a long-term sustainable high pricing,” he said.
Molycorp plans to fund its $511 million expansion project in California partially through an upcoming $150 million debt facility [ID:nWNAB4893].
Reporting by Paul Eckert in Washington and Alina Selyukh in New York; Editing by Richard Chang