China Cuts Rare Earth Production 20%, Creates Tense Trade Relations

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(Photo: David Ritter)
(Photo: David Ritter)

WORLD

  • China cuts production of rare earth to respect new minimum output guidelines and help protect rare earth resources
  • China produces over 90% of world rare earth supply, holds 30% of world rare earth deposits
  • Japan, the US and Europe complain to World Trade Organization that China is violating free-trade rules
  • China aims for greater control over global rare earth pricing  

Chinese government officials have decided to curb China’s production of rare earths – minerals that technology makers rely on for high-tech products – by nearly 20%. As China produces over 90% of the globe’s rare earth supply, this decision is fostering tense trade relations with the US, Japan and Europe.

Output is being reduced to adhere to new production guidelines, requiring companies to meet minimum output levels that specify mines must now produce 20,000 metric tons annually and smelting operations need to produce 2,000 tons. The impact is a halting of operations at a third of China’s 23 mines and nearly 50% of its 99 smelting companies.

China has also reduced the number of companies allowed to export rare earths. It claims that this consolidation will help protect rare earth resources and be more beneficial for the environment.

China Attractive Rare Earth Supplier

In a time of economic uncertainty and unemployment, this news is unwelcome to foreign companies relying heavily on exports, including high-tech products requiring rare earths. Many devices – from smart phones to mercury-vapor lights to hybrid cars – contain rare earths, which are 17 minerals with conductive and magnetic properties.

While China holds 30% of the world’s rare earth deposits and rare earths are found in other countries, including the US, fewer environmental restrictions and lower labor costs have made China an attractive supplier.

Unsurprisingly, Japan, the US and the European Union have filed a complaint with the World Trade Organization stating that by restricting its rare earth exports, China is violating free-trade rules.

China denied any violation and noted the environmental benefits of its decision.

Presently, like in 2009 when it initially set export curbs for rare earths, China looks to increase profit from the raw materials Japanese, American and European companies were transforming into high-tech products.

It hopes foreign companies will now move production to China and create partnerships with local companies.

However, China’s recent decisions have spurred foreign producers to announce production plans in India, Russia, Canada, California and other regions.

China Seeks to Control Global Rare Earths Industry with New Platform

China unveiled a new physical trading platform for rare earths in Baotou, in north China’s Inner Mongolia Region, which provides over 50% of the world’s rare earth output. The platform was spearheaded by Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. as well as nine other organizations, and cost over $15.75 million.

Ma Pengqi, a rare earths expert, revealed to Xinhua News that the trading platform is part of China’s plan to have a greater ability to control the global pricing of rare earths, and move from being a low-cost factory to a major player in this industry.

Key Statistics – World Rare Earth Industry

  • China dominates the rare earth industry, accounting for over 95% of the production of rare earth around the world. (source: Visiongain)
  • In 2012, it is expected that the rare earth market worldwide will be over $18 billion. (source: Visiongain)
  • The fastest gains in volume from any rare earth types are expected to come from neodymium and dysprosium. (source: Freedonia) 

By Christelle Agboka for
Christelle Agboka is a freelance journalist based in Kingston, Ontario, who covers business and economy news.

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