China's grip on rare earths supply loosens as more overseas mines start

The mainland's share of global rare earths supply could fall to as low as 65 per cent next year from 90 per cent in 2011 as more overseas projects come on stream and domestic illegal mining is tackled, according to state-owned China Minmetals.

Beijing has come under fire over recent years for export curbs on the minerals, which are used in a range of high-technology products.

Wang Qionghui, an assistant president at Minmetals, a state-owned mining and trading major that is one of six firms leading the fragmented industry's consolidation, told the China Mining conference the mainland's supply was increasingly constrained by tighter enforcement of illegal mining. "In recent years, legal output volumes have grown modestly … but with strengthened control on illegal activities, the actual supply will gradually fall," he said.

Legal output has been controlled at about 9.3 million tonnes between 2011 and last year, while export quotas were set at just above 30,000 tonnes, according to Wang.

In August, the World Trade Organisation upheld a March ruling that China's restrictions on rare earths exports violated global trade rules. A Shanghai-based analyst yesterday said it was up to importing countries to take any action against Beijing over the quota, adding that she was unaware of any such moves.

This year's authorised production is projected to rise 12 per cent to 10.5 million tonnes, but the export quotas remain roughly the same. Illegal output was estimated by industry executives to exceed 40,000 tonnes in 2012, Xinhua reported last year.

Illegal mining is especially prevalent in southern China, as the resource can be extracted without sophisticated equipment, while small-scale mining over a large number of locations made enforcement against it difficult.

Wang cited a 40,000-tonne-a-year expansion by US-based Molycorp at its Mountain Pass project in California as headlining efforts by overseas miners to raise output capacity. A number of 20,000-tonne-a-year projects are being built in Australia, and another project of the same capacity is expected to come on stream this year in Greenland.

"However, since the new overseas projects are mostly focused on light rare earths, over 70 per cent of the world's heavy rare earths supply will still come from China in the medium term," Wang said.

In the pipeline, 429 rare earth mining projects have been planned or started by 261 firms in 37 nations, involving total production capacity of 55,000 tonnes last year, rising to 170,000 tonnes next year. But environmental protection concerns could delay many of the projects, Wang said.

Global demand has been rising 8 to 12 per cent a year. Demand is projected to rise from 127,700 tonnes in 2010 to 300,000 tonnes in 2020, before doubling to 600,000 tonnes in 2030.

Demand will be led by applications in environmental protection, communications, biomedical, advanced equipment, clean energy, advanced industrial materials and new energy vehicles.

Some of the biggest consumers are in industries such as energy-saving lighting, refractory materials in liquid crystal displays and permanent magnets in wind power generators.

China has about 23 per cent of the world's estimated rare earth reserves of 81 million tonnes.