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UPDATE 1-China sets lower rare earth output quotas for first half of 2019

Kitco News

* Quotas at 60,000 T for mining; 57,500 T for smelting, separation
* Down 18 pct from disproportionately high levels a year ago
* Quotas alone cannot meet Chinese demand - association official

(Adds background, comment from association, analyst)

By Tom Daly

BEIJING, March 15 (Reuters) - China on Friday issued output quotas for rare earth minerals for the first half of 2019 at lower levels than last year's unusually high amount, leading to concerns the lower supply may not be enough to meet domestic demand.

China is the world's biggest producer of rare earths, a prized group of 17 elements used in everything from ceramics to consumer electronics, and its output quotas -- typically announced twice per year -- are closely watched.

The mining output quota for the first half of 2019 was set at 60,000 tonnes, down 18.4 percent from a year earlier, while the smelting and separation quota was set at 57,500 tonnes, down 17.9 percent, the Ministry of Industry and Information Technology said in a joint statement with the Ministry of Natural Resources.

Last year's first batch of quotas were set at an unusually high level, which was smoothed out when the second-half quotas were given in October.

The full-year quotas for 2018 ended up at 120,000 tonnes and 115,000 tonnes. Still, the lower quotas has increased concerns that China may not be able to produce enough rare earths for its demand.

"It is already an industry consensus that the total (quotas) cannot meet the demand of China's domestic market," said Chen Zhanheng, deputy secretary general of the Association of China Rare Earth Industry.

Amid a crackdown on illegal mining, China became the world's biggest importer of rare earths in 2018, ahead of Japan and the United States, Adamas Intelligence managing director Ryan Castilloux said on Wednesday. Imports came from countries including neighbouring Myanmar but fears that illegally mined Chinese material is being smuggled to the Southeast Asian country and brought back could well curtail shipments this year, he added.

"There needs to be a major increase (in production quotas) dedicated to heavy rare earths if China is to make up for impending lack of supplies from Myanmar," Castilloux said in an email on Friday.

Heavy rare earths, which include yttrium, a silvery metal used in superconductors and in medicine, are one of two rare earth categories, the other being light rare earths.

China will announce the second batch of quotas, which will "take into account market demand," by the end of June, according to the statement.

(Reporting by Tom Daly; additional reporting by David Stanway in SHANGHAI; Editing by Kim Coghill and Christian Schmollinger)

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