Shares of rare-earths prospectors soared on Wednesday after China cut export quotas, threatening to reduce already tight global supplies and risking action from the United States at the World Trade Organization.
Shares of Lynas Corp., which owns the world's richest known non-Chinese deposit of rare earths — materials used in high tech and automotive manufacturing — jumped more than 10 percent after China effectively cut its export quotas by 35 percent for the first half of 2011 compared to a year earlier.
Other rare-earths companies, including China Rare Earth Holding, Arafura Resources, Alkane Resources and Greenland Minerals and Energy also gained between 8 percent 10 percent.
"Export quotas continue to be a tool for the Chinese government to limit the export of China's strategic resource," Lynas Executive Chairman Nick Curtis said in a statement.
"The growth in the Chinese domestic market coupled with a decrease in production of rare earths in China is a likely cause for the tightening of export regulations," said Curtis, whose company is aiming to start production in about a year.
China, which produces about 97 percent of the global supply of rare earth minerals, warned against basing its total 2011 export quota based on the first half figures.
"Concerned parties should not estimate full-year quotas for rare earth minerals just by looking at the first set of quotas," the Ministry of Commerce said on Wednesday.
Final quotas will take into account domestic production and demand both at home and abroad, according to the ministry.
Demand for rare earths is set to more than double in less than five years, from 120,000 to 250,000 tons by 2015, according to industry estimates.
Prices have surged for these minerals, used in everything from Apple's iPods to fluorescent light bulbs, since authorities in Beijing slashed their rare earth exports by 40 percent this summer, saying China needed them for its economic development.
The U.S. Trade Representative's office was "very concerned" about China's export restraints on rare earth materials and had raised its concerns with China, a spokeswoman said on Tuesday.
Japanese companies, which bore the brunt of China's action, have been scrambling to secure reliable supplies of the minerals.
Last week, Hitachi Metals signed a joint venture with U.S.-based Molycorp to help ensure a steady supply — an announcement that sent its shares up 15 percent in a single trading session.
That followed word earlier this month that Sumitomo Corp agreed to invest $130 million in Molycorp to secure a seven-year supply of the materials.
Since debuting in late July at $14, Molycorp's stock price has nearly quadrupled.
Molycorp owns a rare-earth mine in Mountain Pass, California, which is scheduled to come back on line next year.
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