Global Times Get RE Basics Wrong; China Nonferrous Tenders; New Material Scam; Northern Minerals Boardroom Drama;
Rare Earths 2021 June 28
China’s most controversial English language propaganda outlet “Global Times” carried a rare earth opinion piece:
by a Mr Qian Feng, the Director of the Research Department at the National Strategy Institute at Tsinghua University.
Mr Qian writes:
In 2019, China's exports of rare earth products to the US came in at about 153,000 tons, reaching $79.29 million.
Quantity and value do not commensurate with anything rare earth.
In 2019 the US imported a total of 20,231 t of rare earth products, 78% of which from China:
Source: giti.sg, US Customs
We don’t know, how Qian gets to 153,000 t of rare earths having been exported to USA alone in 2019, which would be way above China’s entire 2019 output quota of rare earth oxides, at an average price of ca. US$518/ton? The lowest priced REO exported to the US comes at a price more than 3 times higher.
This embarrassing error impressively shows the disappointing overall editorial oversight quality of Global Times and blissful lack of concern for simple fact checking.
Qian further says:
After decades of development, the international division of labor in the field of rare earths has become more mature and reasonable. China and the US enjoy mutual beneficial cooperation in the field.
This could be described as a reasonable approach, however:
Facing the US' trade war and technology crackdown, China has never chosen to weaponize rare earth.
Nothing could be further from the truth. This statement is historically, provenly, self-admittedly false.
There is precedence: 2010.
Also during the current trade war scenario, as late as 2019, Chinese ministries looked into the usefulness of a rare earth export embargo and found it ineffective, possibly self-harming.
However, the China leadership had signaled readiness to use rare earth magnets exports as a weapon.
For a member of one of China’s most prestigious strategy think tanks, we are tempted to believe there might be substantial room for improvement.
Related to the above, this week’s REIA’s newsletter carried a link to a write-up:
The Biden administration’s 100-day review of supply-chain vulnerabilities has produced fresh insights into the United States’ dependence on China for supplies of rare earths and other critical materials but falls far short of a strategy to achieve any change.
The study found that 60% of essential civilian demand for rare-earth magnets was embedded in other imported manufactured goods.
By contrast, two-thirds of defence demand is for direct rare-earth permanent magnets, which are then used by US manufacturers.
‘DoD’s import posture affords it marginally greater visibility into its foreign reliance compared to other essential civilian sectors, who may not even realize their exposure to an NdFeB [rare earth] magnet disruption since it is several tiers removed from the products they purchase from foreign sources,’ the report says.
In a nutshell.
While China made clear, that China will continue supplying rare earths, its Foreign Ministry had emphasized displeasure with Chinese export products possibly being used for producing weapons that may threaten China.
Unrelated to that statement, regarding subsequent China sanctions against Lockheed, who are good for ⅓ of the US defense procurement, it remains unclear if these sanctions included rare earths and permanent magnets and if Lockheed buy any of these in China at all.
In our August 9, 2020 issue we had analysed for you Lockheed’s potential vulnerabilities.
Obviously, the main issue that needs fixing is US (and EU) defense requirements for permanent magnets, also because of that we advocate as per our previous posting to start with domestic production of NdFeB magnets.
In terms of defense, happy for the US, NdFeB maker Hitachi Metals is now US-owned (China’s Zhongke somehow did not pursue the acquisition). But it is a band-aid, still dependent on heavy rare earths from China, but largely independent in light rare earths thanks to Lynas’ supplies from Malaysia.
Lynas, however, continues being under threat to lose its production license and Hitachi’s magnet product losses were and are unsustainable.
China has no interest in limiting the free flow of permanent magnets, as it built up enough capacity to easily feed world demand until 2030.
If worse comes to worst, the options would look like this:
China could unitlaterally declare rare earths and permanent magnets dual-use products (link to US explainer), exports then would be subject to an under-penalty enduse certification, which naturally then would prevent defense-related companies from obtaining Chinese magnets;
The US could sanction world exports of rare earth raw materials to China, choking China’s rare earth production for quite a while.
Neither would make much sense:
China knows, that all weapons that could possibly threaten China have already been built, while
the US know, that any trade-inhibiting action would leave a big mess behind, that would in no way contribute to solving whatever problem.
For some clarity: Probably in history there have never been two nations as dependent on each other as China and USA today.
The rare earth issue will not be ‘solved’ during the Biden administration, if the US want to walk it alone, perhaps not even during the Xi administration.
Meanwhile, the CO2 emissions issue won’t become better either.
The report to the US-president
mentions “recycling” 193 times.
National Material Reserve Adjustment Center: The first batch of national reserves of copper, zinc and aluminum in 2021 will be released in the near future
China is auctioning off some national metal reserve inventory, in order to relax the market a bit.
Pundits argue, that the quantities involved are a drop in the ocean and that the auctions would not make a dent.
Perhaps, but as usual the devil lives in the detail.
Copper cathodes in a warehouse in Dalian
Take the example copper. The quantity to be auctioned off is 20,000 t of class A copper cathodes according to BS EN 1978:1998, inventory after 2008, in 100 t lots.
Actually, there is a typing error in the tender specification, for each 100 t lot it says BS EN 1987:1998, which is a standard applicable to “electrically propelled road vehicles”.
One would assume, that a single trader would snap it all up and then the material disappears in that company’s inventory.
The tender is only open to certified copper processing and copper consuming companies. The goods under tender must not be resold as-is, thus the tender terms automatically disqualify traders and stockists from participating.
None of the bidders may be related or affiliated to one another in any way, which, along with other details, is easy to check via China’s public social credit system within minutes.
Then, the total quantity is not sold off at a single location, it is distributed among principal copper consumption locations in China.
Source: Map Australian National University, data China National Material Reserve Adjustment Center
This way the impact of this and other auctions is being maximized.
The current tender has been announced as only the first batch, suggesting more tenders will follow.
But while graphene's prospects are increasingly promising, there is a very different argument: graphene is a hoax in China.
In March 2015, Chongqing Green Intelligent Technology Research Institute of Chinese Academy of Sciences announced the launch of a graphene mobile phone called "Yingchi setter α". According to the publicity at that time, its light transmittance was as high as 97%, the charging rate of the mobile phone was increased by 40%, the battery life was extended by 50%, and the energy density of the battery was also increased by 10%. Because with graphene, although the phone is only equivalent to a thousand yuan configuration, the price can also be as high as 2499 yuan.
Eight months on, the graphene phone has not been on the market, despite the announcement of the first 30000.
"A few years ago, when nano materials were hot, there was a lot of" nano + "concept hype in China. This time," graphene "is the same. Many graphene products are a deception." Qi Lu, director of the 863 program, a material scientist and professor of the school of chemistry and molecular engineering, Peking University, said. Due to its contribution to new materials and energy, Qi Lu is also known as the main founder of positive materials for lithium cobalt and lithium manganese batteries in China.
According to the reporter, graphene is mainly divided into two kinds: single atom film graphene and graphene powder. The former is mainly prepared from methane, acetylene and other carbon containing gases by chemical vapor deposition, which has nothing to do with graphite or straw.
Graphene powder is made of natural graphite, oxidized by concentrated acid and strong oxidant, and then reduced by expansion heat treatment. As for the graphene extracted from straw, it is said that 15 Jin [500 g] corncob can extract one jin of graphene, which many insiders don’t realise.
In addition to the obvious deception of graphene underpants, the "graphene battery" and "graphene lithium battery" which are developed by many research institutes and enterprises are also accused of lying.
At present, the practice of graphene used in battery field is to add graphene material in the positive and negative electrodes of lithium battery. "This is obviously misleading." Recently, Liu Guanwei, a researcher at Tsinghua energy Internet, questioned the online heat transfer of the article "graphene battery: Is this "legendary" graphene battery technology a big lie?
In the article, Liu Guanwei gave a clear view at the beginning: The technology of "graphene battery" is almost nonexistent.
Hypes are not a privilege of the West.
Northern Minerals have a boardroom drama:
“That, pursuant to section 203D of the Corporations Act, Ms Yanchun Wang be removed as a Director of the Company with immediate effect.” In due course a general meeting will be convened to consider the above resolution.
Ms Wang Yanchun represents major shareholder Conglin Baoyuan International Investment Group a.k.a. Australia Conglin Investment Group Pty Ltd in Brisbane, who at a certain time even held the majority of NTU shares.
Behind Australia Conglin stand Conglin Baoyuan International Investment (Beijing) Co., Ltd. as well as Inner Mongolia Conglin Asset Management Co., Ltd.
In both Conglin companies Ms Wang Yanchun is a 40% shareholder.
60% are held by the CEO of both companies, Mr Yue Conglin (51). Mr Yue is controlling shareholder, director and/or CEO of a total of 32 companies.
Ms Wang is Mr Yue’s girlfriend.
Yue Congling, source China Ling Gao Public Opinion Network, 2019
China’s social credit system lists Mr Yue as a non-trustworthy person. Correspondingly he is unable to board airplanes or high speed trains in China, among other restrictions.
Ca. 2009-2015 Mr Yue began borrowing heavily from a Beijing loanshark named Wang Yongsheng in 88 tranches. The total amount was RMB 245 mio (ca. US$37 mio).
Wang Yongsheng, source China Ling Gao Public Opinion Network, 2019
As it often happens in such relationships, things first turned sour and then it turned ugly.
Mr Yue got arrested in December 2015 and his companies offices sealed by Mr. Wang. At the time of trial Mr Yue could not prove that he had returned sums to Wang Yongsheng, so Mr Yue says, because the offices had been sealed.
The court declared Mr. Yue in default of debt anyway. He was only released on February 6, 2019.
Mr Yue also heads rare earth related companies in Baotou, home of China Northern Rare Earth Group and Baotou Steel (Baogang), who tried and failed to invest AU$20 mio in Northern Minerals, as the Australian government blocked the transaction.
Mr Yue had always maintained, that his company had invested in Northern Minerals to serve the Chinese nation, and to prevent the heavy rare earth opportunity (xenotime) from falling into in Japanese hands.
The former managing director of Northern Minerals, the battle-hardened George Bauk, did it anyway, according to Mr Yue, and signed with Japan.
We speculate that the offtake MOU with an unnamed company, announced on December 21, 2012, may have actually been with a Japanese company, which was not named in order not to upset the Chinese shareholders of Northern Minerals.
Anyway, what is happening now?
We think Northern Minerals are stuck. Not only is the board controlled by Chinese shareholders, NTU also still owe money to Sinosteel. Further substantial investments from China, given frosty Australia-China relations, will likely be blocked. Investments and other engagements from Western sources are unlikely to come forward, given Chinese control of NTU.
In order to have a future, NTU must wrestle itself out of Chinese control. The timing is good, because owing to dilution the shareholding of Conglin has molten to just over 5%, so NTU chairman McCavana can start to eject Chinese board members in order to replace them with “politically correct” persons.
A bit ugly, but there is nothing beautiful in the current state of relations between China and Australia.
Prices in light rare earths are steady, NdPr up ½% since last TREO, heavies dysprosium and terbium down 1.5-2%, gadolinium up 1% in RMB terms.
After rising for a year, the RMB began falling vis-a-vis the USD:
As ever, these prices are ex-works China incl. 13% VAT, translated to US-Dollar at the official exchange rate of that day.
Currently, we see no benefit in incurring the cost of separating Nd and Pr, as separated Nd offers zero margin over NdPr. Unfortunately and absurdly, this can work either way, so we’d rather not call the price.
Chinese pundits expect prices to rise in Q2.
For more we have no time today.
Thanks for reading and have a great week!