China leaves West dismayed by move to cut vital mineral exports in 2011

LONDON/BEIJING - In a sign of its growing industrial and political clout, China has cut its export quotas for rare earth elements (REEs) by 35 per cent for the first six months of 2011, threatening to extend a global shortage of the minerals and intensifying a scramble to find alternative sources.

Instead of last year’s 22,282 metric tons, the Chinese Commerce Ministry has said that only 14,446 tons of REEs, split among 31 domestic and foreign-invested companies, will be exported.

Mines in China supply 97 per cent of the world’s rare earths, 17 obscure metals that possess various qualities, such as conductivity and magnetism, that make them an essential component in many modern applications such as smart phones, computers and lasers.

The Independent quotes commentators as saying that this announcement by Beijing is probably designed to limit the environmental damage caused by the mines while ensuring its manufacturers were able to meet growing domestic and international demand.

Western governments have reacted with dismay to China’s export constraints.

The US Trade Representative’s office said it had raised concerns with China over the export restraints. Britain, which previously said it was monitoring whether China’s stance on REEs broke World Trade Organisation rules, reiterated its commitment to “free, fair and open markets”.

Electronics companies are likely to be the hardest hit by rising prices caused by the export cut, which was predicted by The Independent in January.

The consumer electronics giant Sony described the move as an obstacle to free trade.

“We will watch the situation carefully,” a Sony spokesman said.

Other manufacturers, such as Apple, whose iPad uses rare earths, declined to comment.

REEs lie near the surface in only a few, usually inhospitable, areas.

During the past 20 years, China has rapidly increased production from a single mine near the city of Baotou, in Inner Mongolia, leading to the closure of mines in the US and elsewhere unable to compete with the low prices.

However, a global shortfall now looms because worldwide demand for REEs has almost tripled from 40,000 tons to 110,000 tons in the past 10 years, while China - which accounts for about 75 per cent of usage with the remainder divided between Japan, the US and Europe - has begun to scale back exports, from 48,500 tons a year to 14,446 tons for the first half of 2011.

The move has the potential to damage the industries reliant on rare earths, which are estimated to be worth three trillion pounds, or five per cent of global GDP. (ANI)