China strengthens grip over rare earths market

source: AFP

The State Council, China's cabinet, also said late Thursday that it would prohibit any increase in production capacity for existing projects to separate rare earths from crude ores.

The commerce ministry had said earlier that it would expand export quotas for rare earths to include iron alloys containing more than 10 per cent of the elements from Friday.

The coordinated announcements bolstered a campaign by Beijing to strengthen control over the highly sought-after metals 17 elements critical to manufacturing everything from iPods to electric cars and missiles.

The State Council said the new policies would "promote the sustainable and healthy development of the rare earth sector", which has become increasingly important given Beijing's near-monopoly on production.

The government will "significantly reduce" the number of rare earth mining and separating enterprises via merger and acquisition -- an effort that is seemingly aimed at strengthening the pricing power of producers, it said.

The State Council also said it would further raise the threshold for companies applying for export quotas and "severely punish" firms that resell the increasingly valuable quotas.

China produces more than 95 per cent of the world's rare earths and Beijing has started cleaning up the industry by closing illegal mines, setting tougher environmental standards and restricting exports.

The government has cut rare earth exports for the first half of 2011 by 35 per cent compared to a year earlier, having slashed the quota by 72 per cent for the second half of last year.

In April, it also raised the tax on rare earth ores to 30-60 yuan ($4.6-9.2) per tonne from the previous 0.4-3.0 yuan per tonne.

The moves have prompted complaints from foreign high-tech producers as the prices of rare earth metals surged on average by about 130 per cent last year.

The United States and Australia have responded by developing or reopening mines shuttered when cheaper Chinese supplies became available.

In December a Japanese trading house announced it would build a plant for processing rare earth minerals in India in a bid to bypass China's stranglehold on the market with an annual 4,000-ton production target.