Beijing moves to curb exports of rare earths

PUBLISHED : Thursday, 17 February, 2011, 12:00am
UPDATED : Thursday, 17 February, 2011, 12:00am

China will introduce strict production and export quotas for rare earths as it seeks to tighten control over the raw materials crucial for the production of hi-tech goods from smart phones to weapons systems.

Beijing said limits would be imposed on the mining and overseas shipments of the minerals to improve industry controls and environmental standards.

Rare earths are a group of 17 elements, which are mined mostly in Inner Mongolia . They are sometimes referred to as '21st century gold', referring to their value-added applications.

Up to 95 per cent of the world's rare-earth supply is controlled by China, which started cutting production last year because of concerns that prices for the non-renewable natural resources were too low to cover environmental damage caused by mining.

The policy to limit production is seen as another step towards building a de facto cartel to regulate prices and standards of rare earths given their strategic importance to the mainland.

A new industry body to control production of rare earths is expected to be established in May, headed by Wang Caifeng, a former official from the Ministry of Industry and Information Technology.

The new organisation is expected to oversee government-arranged mergers and acquisitions, likely to lead to large monopolies in rare-earth mining, smelting and processing, and exporting.

The State Council said the changes would allow the industry to 'balance the domestic and international markets', ban illegal mining and limit damage to the environment.

The future quota system will consider domestic resources and production, and the 'situation of the international market.'

US manufactures including Apple and various Japanese companies have been scrambling to secure reliable supplies of the minerals outside China as Beijing steadily reduces export allocations.

Rare earths are used in everything from hybrid car batteries to smart phones, iPads and sophisticated weapons systems.

The State Council, while acknowledging rare earths' strategic importance, said the sector was plagued by problems such as illegal mining, environmental damage and waste, a lack of application research and uncontrolled exports.

The General Administration of Customs says the mainland's total rare-earth exports last year were, as measured by weight, 39,813 tonnes, down 9.3 per cent from 2009.

The nation in September 2009 decided to cut annual exports to 35,000 tonnes from 2010-15, saying the reduction was intended to protect the environment and prevent undue exploitation. However, on October 19 last year, China Daily reported that Beijing would further cut rare-earth quotas by around 30 per cent.

This was followed by an announcement that 2011's first round of export quotas had been set at 14,446 tonnes, and that the full-year quotas were still 'under discussion'.