Beijing denies rare earths being used as political tool
A Beijing official has insisted China will not use rare-earth exports as a bargaining tool to gain political leverage with other countries.
Zhu Hongren, a spokesman for the Ministry of Industry and Information, admitted China had cut exports of rare-earth minerals, which are used in hi-tech products from iPods to hybrid cars, but said this was to reduce waste and pollution, and that the measures were 'in line' with World Trade Organisation rules.
China accounts for 90 per cent of the world's rare-earth exports, and has sparked complaints from the US, German and Japanese governments after reducing shipments.
In July, Beijing imposed a 72 per cent cut on rare-earth exports for the second half of 2010.
Last month, with tensions raging between China and Japan over the disputed Diaoyu islands in the East China Sea, Japanese importers reported a severe shortfall in shipments of rare-earth minerals from China.
But some analysts believe China is not cutting rare-earth exports to strengthen its hand in the Diaoyu spat, or even its currency war with the United States. Instead, they say, China halted shipments of rare earths last month because high demand for the minerals meant the nation's official export quota was filled too early in the year.
Matthew James, vice president for corporate and business development at Australian rare-earth miner Lynas Corporation, claims, after analysing customs data, that China exported 28,500 tonnes of the minerals by the end of August, out of its 30,258-tonne export quota for 2010.
'I am not sure whether the reduction in shipments was political, or whether China simply met the quota early,' James said.
Andrew Driscoll, a resources analyst at Asian stockbroker CLSA, agreed. 'It makes sense that the anecdotal reports of sharply reduced shipments from China could well be a function of them simply running out of quota too quickly,' he said.
Whatever the reason, China's export cut has sent prices of the minerals skyrocketing and led to foreign governments rounding on Beijing over what they have suggested is an artificial stranglehold on supplies.
US Secretary of State Hillary Rodham Clinton yesterday called on Beijing to clarify its policy on rare earths, saying she hoped trade in the high-tech minerals would continue 'unabated and without any interference', newswires reported.
Michael Komesaroff, principal of Australian metals consultancy Urandaline Investments, said China was certainly gaining from the rare-earth spat. But, he said, Beijing's aim might not be to agitate the US or Japan. Rather, he said, China wanted to highlight its control of the minerals because of their use in hi-tech applications.
China has long been keen to build a hi-tech export industry that can compete with Japan, Taiwan and South Korea.
'Rare earths represent the new industrial age,' Komesaroff said. 'These minerals are used in hi-tech applications and represent China's move up the commodities and manufacturing value chain.'
Mary Zhang, an analyst at Asian Metals in Beijing, said she expected Beijing to cut rare-earth exports further in 2011.
'The export quota for rare earths will be reduced more in the coming year, we think by another 10 to 30 per cent,' she said.
'The effect could be an oversupply domestically and prices falling in China, while prices continue to rise in the export market.'
