China's newly adopted molybdenum export quotas may cut exports of the minor metal by as much as 30 percent, aiming to keep more of the country's mineral resources in Chinese hands, trade sources said on Wednesday.

The policy change would also help Beijing to reduce the country's trade surplus, which climbed more than 80 percent in the first five months of 2007 from the same period a year earlier.

"I heard the volumes of the new quotas could be just 70 percent of total annual exports," said a trader at Jinduicheng Molybdenum Group, the world's third-largest molybdenum producer.

The trader said his company had not received actual official amounts for the quotas, which are expected to be released as early as this week.

He added it was also not clear whether the quotas would be calculated based on total Chinese molybdenum exports last year, or on the volume of exports by firms which have been granted export licences under the new quota system.

A China-based trader at Phelps Dodge Corp. said a draft proposal for quota volumes had been circulated among major traders and producers to seek comment, but a final decision had not yet been reached by the central government.      

"The quota will have a major impact on long-term trade in the market, compared with other measures such as export duty increases," he said.

Beijing has said it would limit exports of molybdenum and indium from June 18 by introducing a quota system and issuing licences to exporters, but did not give the volume of products that might be exported under the quota system.

Earlier this month, it issued a list of firms that were allowed to export indium and molybdenum and their products.

Only about half the firms that applied to export were authorised to do so, based on their size and volume of trade.

Beijing is trying to limit exports of molybdenum and indium to encourage processing firms to locate in China, and to preserve reserves of currently too small to absorb production.

The quota system is expected to lift international molybdenum prices, but the effect could be muted in the short term as an export tax increase imposed on some molybdenum products in June had already driven up the overseas market, they said.

"The price differential for the metal between Europe and China has already widened in June since the tax policy was amended, and I do not expect it will widen further," said the trader at Jinduicheng.