Rare-earth exports a mess, veteran says

PUBLISHED : Saturday, 30 October, 2010, 12:00am
UPDATED : Saturday, 30 October, 2010, 12:00am

China's restriction of rare earth exports is the result of a 'bureaucratic mess' in Beijing rather than a mainland plot to wield power over foreign governments, a senior consultant to the industry has claimed.

Beijing has halted shipments of rare earths, which are used in hi-tech applications from iPods to hybrid cars, to reorganise the industry, which is blighted by pollution and illegal production, said Jack Lifton, a 48-year veteran of the rare earth sector and head of US-based Technology Metals Research.

Lifton made the remarks at a CLSA investor presentation.

But the mainland cut exports without immediately explaining why, which was 'a mistake,' Lifton added.

China produces 97 per cent of the world's rare earths. In July, Beijing's Ministry of Commerce, which sets export quotas for rare earth metals every six months, said China would only export 7,976 tonnes of the minerals in the second half of 2010, 72 per cent below the same period last year. Beijing now stands accused of hoarding the hi-tech metals to gain clout in its Diaoyu islands spat with Japan and currency war with America.

'All these stories about all these plots and plans, this is actually sort of a bureaucratic mess,' Lifton continued in the briefing, a transcript of which was published by CLSA.

While the global rare earth market is tiny - with sales of just US$2 billion annually - China's export clampdown has prompted an intense round of Beijing-bashing.

US Secretary of State Hillary Clinton called on China on Tuesday to 'clarify' its rare earth policy. The German Federation of Industries, meanwhile, said on October 21 that rare earths were becoming a 'geopolitical issue'.

Japan is trying to secure supplies of the minerals from Vietnam and Mongolia.

In a Beijing briefing on Tuesday a Ministry of Industry and Information spokesman claimed the central government was not using rare-earth quotas to maximise geopolitical leverage. Instead, said the spokesman, Zhu Hongren, China wanted to lower waste and pollution from mining the minerals.

'The Chinese have always had a problem with illegal mining,' Lifton claimed.

'They're slowing down everything in rare earth. They want to clean up the environment, they want to know who's producing what, how much is really getting done, what it really costs, they're trying to figure all this out. And this is slowing down production,' he continued.

Dudley Kingsnorth, a rare earths consultant at the Industrial Minerals Company of Australia, said China was reducing exports to convince high technology manufacturers from Japan, Germany, the United States and Korea to move their factories to China.

'A rare-earth mine might be 100 jobs. Manufacturing phones, televisions, car batteries and the rest could create hundreds of thousands of jobs. China is cutting exports to move its factories up the value chain.' .

Kingsnorth added this was nothing new, but said: 'The issue is the quantum by which quotas have been ratcheted down this year.'

Lifton could not be reached for further comment.