China to Set Up Trading in Rare Earths

Brilliant move!

from People's Daily:

China is considering establishing an industry association and a government unit for the rare earths industry to gain more control over the precious metals, senior officials said Tuesday.

The rare earths industry association is likely to be launched in May and will assist companies in exports and international cooperation, Wang Caifeng, a former official of the Ministry of Industry and Information Technology (MIIT), who is setting up the group, said at a forum.

"We will be on the frontlines leading price talks with foreign buyers. Our role will be similar to that of the China Iron and Steel Association (CISA)," she said.

Chinese industry associations have served as agents through which companies negotiate with foreign suppliers and buyers, such as CISA representing Chinese steelmakers in talks with global miners on iron ore prices.

China also plans to establish a government unit in 2011 to specifically manage the rare earth sector, said an industry insider who requested anonymity. There are six ministry-level bodies overseeing the sector, including MIIT, the National Development and Reform Commission, and the Ministry of Commerce.

"The MIIT is leading the work of setting up the new unit, but it hasn't been decided whether it will be vice-ministerial or bureau level," he said. "The new unit will formulate the industry plan and guide the industry."

China has released guidelines to reform the industry by cracking down on illegal mining practices, encouraging more consolidation and reducing exports as oversupplies have depleted its own resources and seriously damaged the environment.

Rare earths, composed of 17 elements, are used in a number of high-tech processes ranging from wind turbines and hybrid cars to missiles. China has about 30 percent of global rare earths reserves, but produces 97 percent of the world's total.

China on Tuesday issued the first round of 2011 export quotas for rare earths, 14,446 tons, 11 percent less than the first round last year, according to a statement on the Ministry of Commerce website.

On claims made by United States on China's alleged restrictions on exports of rare earths, experts said China's policy has never violated the rules and regulations under the framework of the World Trade Organization.

On Tuesday, in the annual report on China's compliance with WTO rules, the Office of the US Trade Representative filed complaints to the WTO against China's trade policy for the alleged "excessive government intervention". The rare earths export policy was highlighted in the report.

"China's moves are based on market demand and economic development. Based on this, no one should blame China," Wang said.

Zhang Anwen, deputy secretary-general of the Chinese Society of Rare Earths, said: "China's measures are for the sake of protecting the environment for the sustainable development for the industry."

Since 2006, the country has imposed temporary taxes on rare earths exports and set limits on quotas. In 2010, China reduced export quotas to 60 percent, causing alarm among importing countries such as Japan.

The Ministry of Finance said on its website last week that China will raise the export taxes for some rare earth minerals to 25 percent in 2011.

The country is speeding up the pace of mergers and acquisitions in the rare earths sector and is encouraging consolidation among State-owned enterprises. China plans to cut the number of rare earths companies from the current 90 to 20 by 2015.

Rare Earths: About to Become More Rare In the U.S.

So much for cheap technology!

from Reuters:
* China controls 95 percent of global rare earth supplies
* China plans to raises fees on rare earth exports in 2011
* U.S. needs to boost domestic mining of rare earth metals
By Tom Doggett
WASHINGTON, Dec 15 (Reuters) - The United States risks major supply disruptions of rare earth metals used in clean energy products unless it diversifies its sources of the minerals, the Energy Department warns in a report due to be released later on Wednesday.
The United States and other countries are worried that China, which controls 97 percent of the world trade in rare earth metals, will use those supplies as a political weapon and cut back their export when it is in a dispute with another country or to grow China's clean energy technology sector.
"The availability of a number of these materials is at risk due to their location, vulnerability to supply disruptions and lack of suitable substitutes," U.S. Energy Secretary Steven Chu said in a report, due to be unveiled on Wednesday at a rare earth metals conference at the Center for Strategic and International Studies.
The release of the report coincides with trade talks in Washington between the United States and China. U.S. officials are expected to push Chinese officials to loosen export restraints on rare earth elements.
China, which said on Tuesday it planned to raise export taxes on some rare earth metals beginning next month, holds 37 percent of known rare metal reserves, the United States has 13 percent and the rest is in other countries.
The 17 rare earth metals, with exotic names like lanthanum and europium, form unusually strong lightweight materials and are used in a wide range of applications including high-tech and defense products, car engines and clean energy.
CHINESE STRANGLEHOLD
China has vowed that it would not use its dominance of rare earth supplies as a bargaining tool with foreign economies but it has cut its exports of the materials on environmental grounds.
U.S. Secretary of State Hillary Clinton raised U.S. concerns over Beijing's export policy with Chinese Foreign Minister Yang Jiechi during a visit to Asia at the end of October.
The Energy Department said in its report that it looked at the use of rare earths in wind turbines, electric vehicles, solar cells and energy efficient lighting because these clean technologies are expected to be deployed substantially on a global basis over the next 15 years, increasing demand for rare earth metals.
It said that in order to manage the risk of rare earth supply disruptions, the United States must increase its domestic extraction and processing of the materials.
There is only one U.S. rare earths producer, Molycorp Inc (MCP.N: Quote). It is the largest non-Chinese rare earths firm and the only rare earth oxide producer in the Western Hemisphere.
The report said the United States must work closely with its international partners, including Europe and Japan, to boost their production of the materials.
"Diversified global supply chains are essential," the report said.
However, mining rare earth metals can be very expensive and the lead times for new mining operations are long, ranging from two to 10 years.
"Whether a deposit can be mined economically will depend on a number of factors, including rare earth prices, regulatory requirements and improvements in extraction and separation technologies," the report said.
Recycling and reusing the rare earth metals could also significantly lower world demand for the materials.
Traditional energy sectors are also at risk from rare earth supply problems, the report said.
Rare earth ores are used in the fluid cracking catalysts that convert heavy oils in the refining process into more valuable gasoline, distillates and lighter products. Rare earth elements are used in catalysts to produce higher yields of more valuable products such as gasoline.
A disruption in rare earth supplies could have a noticeable impact on refinery yields and require oil refinery owners to make investments so the fluid cracking process will work without the rare earth materials, the department said.
The department said it will develop an updated strategy by the end of next year for increasing supplies of critical rare earth metals.

Rare Earth Trade Wars - Finally the Media Catches On

China has halted some shipments to the United States of rare minerals vital to industry due to anger over a US probe, seizing on a tactic first used against Japan, The New York Times said. The newspaper, quoting industry officials, said that China quietly stopped shipments of so-called rare earths earlier this week in response to the US investigation into alleged Chinese subsidies into its green technology sector.
"The embargo is expanding" beyond Japan, the newspaper quoted an anonymous industry official as saying.
Major Japanese and US companies all make use of rare earths, a group of 17 elements in high-tech products from iPods to hybrid cars. China controls more than 95 percent of the global market.
Japanese industry said that Beijing took similar action last month after Tokyo seized the captain of a Chinese fishing boat in waters disputed between the two countries.
Japan eventually released the captain, triggering criticism by some conservative lawmakers who accused Prime Minister Naoto Kan's left-leaning government of emboldening China.
The row over rare earths has led to calls in major economies to diversity away from China, fearing that Beijing will increasingly wield its economic clout for political reasons.
The United States announced Friday that it would investigate charges that China has handed out hundreds of billions of dollars in illegal subsidies in a bid to dominate the fast-growing green-energy sector.
The probe comes after the United Steelworkers union petitioned trade officials to investigate practices it claims contravene World Trade Organization rules and cost American jobs.
China denied the charges and hit back that the United States was also subsidizing green firms. China has also denied any official campaign to restrict exports of rare earths, suggesting that companies acted on their own.