Fri, Dec 31, 2010 - Page 9 News List

China gets ready to squeeze rare earths

Following an official announcement from the Chinese government on its reduction of export quotas for rare earths and a recent increase in export taxes, officials have started to blame shortfalls in supply on action taken to deal with environmental pollution caused by rare earth mining

By Keith Bradsher  /  NY Times News Service, HONG KONG

ILLUSTRATION: MOUNTAIN PEOPLE

The Chinese Ministry of Commerce on Tuesday announced a steep reduction in export quotas for rare earth metals in the first months of next year, a move that threatens to cause further difficulties for manufacturers already struggling with short supplies and soaring prices.

The reduction in quotas for the early months of next year — a 35 percent drop in tonnage from the first half of this year — is the latest in a series of measures by Beijing that has gradually curtailed much of the world’s supply of rare earths.

China mines more than 95 percent of the global supply of the metals, which are essential for smartphones, electric cars, many computer components and a range of military hardware. In addition, the country mines 99 percent of the least common rare earths, the so-called heavy rare earths that are used in trace amounts but are crucial to many clean energy applications and electronics.

In what seemed to be an effort to reassure traders and users of rare earths, the ministry said in a follow-up statement late on Tuesday on its Web site that it had not decided what the total export quotas would be for all of next year. It typically issues a second, supplementary batch of quotas each summer.

The ministry said on Tuesday night that companies should not make guesses about the total export quotas for next year based on the initial reductions issued earlier in the day.

“We will be considering the production of rare earths in China, domestic demand and sustainable development needs to determine” the full quotas for the entire year, the ministry Web site quoted its foreign trade department director as saying, without naming the director.

Earlier this month, the Chinese Ministry of Finance raised export taxes to 25 percent from 15 percent for some of the most crucial rare earths. The ministry also extended taxes to exports of some rare earth alloys that previously were not taxed.

China gradually reduced its annual tonnage of export quotas from 2006 to last year, then cut the tonnage of allowed exports by more than half in the second half of this year.

Separately, the Chinese government imposed an unannounced embargo on shipments of raw rare earth minerals to Japan from mid-September to late last month, a ban that started during a territorial disagreement over disputed islands.

In addition, rule changes for export quotas have had the effect of reducing the availability of supplies leaving China. Until now, the quotas mostly covered alloys and oxides with a rare earth content of at least 50 percent.

Starting next year, industry executives said, exports of some additional alloys will face restrictions as well, which will have the effect of tightening quotas by about 6 percent.

The commerce ministry provided no explanation for its reduction in initial export quotas for next year, and a ministry spokesman declined to elaborate. White House trade officials have begun an investigation into whether China’s export restrictions violate WTO rules; the WTO prohibits export quotas and export tariffs except for environmental protection and national security.

China’s latest restrictions drew a quick response from the Office of the US Trade Representative in Washington.

“We are very concerned about China’s export restraints on rare earth minerals,” said Nefeterius Akeli McPherson, a spokeswoman for the office. “We have raised our concerns with China and we are continuing to work closely on the issue with stakeholders.”

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