Wednesday, October 20, 2010

China tightens up on rare earth production

China may be stopping exports of so-called rare earths leading to concern amongst technology manufacturers around the world. A recent New York Times report that said China has halted shipments of rare earth minerals bound for the United States and Europe. The reports have rattled the United States in particular. "We've seen the news report and are seeking more information in keeping with our recent announcement of an investigation into whether China's actions and policies are consistent with WTO rules," said US Trade Representative spokeswoman Nefeterius Akeli.

Citing three unnamed industry officials, the New York Times [registration required] reported Chinese customs officials had begun imposing shipment restrictions Monday morning. The move will add to an already strained trade relationship between the US and China. US trade officials recently said they would launch an investigation into whether China subsidises and protects its clean energy producers in violation of World Trade Organization rules. "We strongly support USTR's investigation into whether China is blocking exports of critical minerals to the US," said Representaive Sander Levin, a Democrat from Michigan, who is also the chairman of the House Ways and Means Committee. "If China is found to be blocking shipments of these critical minerals in retaliation to the US investigation ... of Chinese practices regarding green technology, then China's blockade would require the US to immediately challenge these actions as WTO inconsistent," Levin said [CNN / The Atlantic].

The New York Times also reported that China has been blocking shipments of rare earth minerals to Japan for the last month, seemingly in retaliation over disputed territories in the South China Sea [New York Timesregistration required]. China exports around 50% of its mined rare earths to Japan and a permanent embargo would hurt both economies. Production of rare earths has slowed in recent months and the price has risen significantly. 

Meanwhile China has denied it has blocked exports and dismissed allegations made in the New York Times. The Commerce Ministry issued a faxed statement today which stated that "China will continue to supply rare earth to the world." [LA Times / Bloomberg].

More than 90% of the rare earths produced worldwide is mined in China, which cut its second-half export quota by 72% this year, spurring a trade dispute with the US and raising tensions with Japan. The Chinese government said it aims to shut polluting and loss-making mines and ensure it can meet domestic demand as the nation tries to stem environmental damage and develop more value-added industries. However some see the move as an effort to artificially inflate prices.

Rare earths are a group of 17 chemically similar metal elements, including lanthanum, cerium and neodymium, that are used in relatively small amounts in a range of applications, including Boeing helicopter blades, Raytheon missiles, Toyota hybrid cars and wind turbines. They are also widely used in mobile phones, computers and other electronic products.

Rare earths are not as rare as the name suggests, however most mining operations around the world have slowed partly due to issues of pollution. Extraction of these elements can be costly both in terms of man hours and to the surrounding environment.

China's slow down of production, whether motivated by ecological or economic reasons, will likely force buyers to look elsewhere for supplies. The Japanese government has already set aside $150 million to help find alternatives to rare earths and source supplies from other countries, Shigeo Nakamura, president of Advanced Material Corp., has said. Meanwhile the Toyota Tsusho Corp., a trading company affiliated with Toyota Motor Corp., has formed a joint venture with Sojitz Corp. and a Vietnamese state-run mining company to export the metals to Japan from 2012, spokesman Katsutoshi Yokoi said. The company acquired Tokyo-based rare earth metal importer Wako Bussan Co. in December 2008, which will import from India from next year.

In June this year Molycorp Inc. said it was planning to re-open its rare earth mine in California. And Sydney-based Lynas Corp. is building a $532 million rare earth minerals project in Australia. Beijing's belligerence may only only serve to drive custom elsewhere. 

[Rare Earths - USGS PDF / Wikipedia] Pictured: An Apple Store in Beijing. The mobile phone industry relies heavily on rare earths
tvnewswatch, London, UK

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