Thu, Dec 30, 2010 - Page 11 News List

China’s rare earths export cut raises trade concerns

TRADE WAR?Makers of high-tech products in the US, Japan and Europe will all be hit by the rare earth export clampdown, as China controls 97 percent of the market

Reuters, SYDNEY

China has raised fresh international trade concerns after slashing export quotas on rare earths minerals, risking action from the US at the WTO.

China, which produces about 97 percent of the global supply of rare earth minerals, cut its export quotas by 35 percent for the first half of next year versus a year ago, saying it wanted to preserve ample reserves, but warned against basing its total next year’s export quota on the first-half figures.

The US Trade Representative’s office was “very concerned” about China’s export restraints on rare earths and had raised its concerns with China, a spokeswoman said on Tuesday.

US makers of high-tech products such as Apple Inc’s iPads, along with Japanese companies, have been scrambling to secure reliable supplies of the minerals outside of China as Beijing steadily reduces export allocations.

Japan’s Sony Corp said China’s move to cut export quotas was a hindrance to free trade and that it would work to reduce its reliance on Chinese supplies.

“At this point in time, there is no direct impact on our company. But further restrictions could lead to a shortage of supply or rise in costs for related parts and materials,” Sony said in an e-mail statement in response to questions from reporters. “We will watch the situation carefully.”

Sony will look for ways to cut its use of rare earths, including developing alternative materials, spokeswoman Ayano Iguchi said.

However, China’s move came as a shot in the arm for some companies.

Lynas Corp, which owns the world’s richest known non-Chinese deposit of rare earths, jumped over 10 percent even though it will be at least a year before it is capable of mining any material from a new lode in Australia.

Other rare earths companies, including China Rare Earth Holding Ltd (中國稀土控股), Arafura Resources, Alkane Resources and Greenland Minerals and Energy Ltd 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 and has already forged supply contracts with Japanese traders.

World demand for rare earths at present is about 110,000 tonnes a year, with China accounting for about 75 percent of total demand with the remainder split between Japan, the US and Europe, in descending order.

Demand for rare earths is set to more than double to 250,000 tonnes by 2015, according to industry estimates.

Prices have surged for these minerals, also used in making 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.

Last week, Hitachi Metals Ltd signed a joint venture with US-based Molycorp Inc 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 US$130 million in Molycorp to secure a seven-year supply of the materials.

Since debuting in late July at US$14, Molycorp’s stock price has nearly quadrupled. The company owns a rare-earth mine in Mountain Pass, California, which is scheduled to resume production next year after a 10-year hiatus.

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