China has ended a quota system previously aimed at restricting exports of rare earths, a move in line with a World Trade Organization panel ruling last March.
The Ministry of Commerce issued a notice at the end of December that abolished export quotas for rare earths, key elements in defence industry components and modern technology ranging from iPhones to wind turbines. The abolished export quotas also include tungsten, molybdenum and fluorspar.
Chen Zhanheng, deputy secretary-general of the China Rare Earths Industry Association, said the removal of the quota system is expected to increase the number of exporting companies and that competition for exports will become fiercer, which in turn is likely to push up the price of the rare earths after prices hit rock bottom last year.
Chen said previously there were 28 rare earths producers working under the export quotas. Now any company with export contract is eligible to export.
Du Shuaibing, an analyst at natural resources consultancy Baichuan Information, however, said he thinks the removal will have little impact on the market as the export quota system had been “invisible” in recent years in any case, since actual export volumes fell short of the quotas.
He said the major impact will come when a tariff of 15 to 25 percent is expected to be removed in May.
Chen predicts the tariff will be lifted by June resulting in price competition across the global rare earths market as Chinese export prices lower.
China produces more than 90 per cent of global rare earths, effectively giving it control of supply of a group of key elements used in sectors such as defence and renewable energy.
The country raised tariffs and imposed strict quotas in 2010 to not only protect its scarce resources but also reduce the environmental impact of their extraction, but importers in Japan, Europe and the United States complained that the move breached trade rules.
China was widely expected to abolish the quota system and replace it with resource and environmental taxes following the WTO ruling in March last year.
The government has said it sought to improve China’s pricing power over rare earths by imposing strict domestic production caps and cracking down on illegal production and smuggling.
It has also raised environmental and production standards and encouraged big State-owned firms to integrate with smaller producers.
China to further consolidate rare earth resources
The Ministry of Industry and Information Technology is expected to deliberate on plans by three Chinese rare earth companies to consolidate the rare earth industries this week, Shanghai Securities News website reported Oct 29, 2014.
The MIIT disclosed this information at a rare earth forum held in Xiamen city, East China’s Fujian province on Oct 23, according to the report. If the plans are approved, the consolidation of the country’s rare earth resources is expected to be completed by the end of the year.
The three rare earth firms that proposed the plan are China Minmetals Corporation, Ganzhou Rare Earth Group Co Ltd and Rising Nonferrous Metals Co Ltd.
The detailed integration plans have not been published, but it is reported that Ganzhou Rare Earth Group intends to cooperate with Jinpanxi Rare Earth Group Co Ltd，a joint venture of six rare earth firms in Southwest China’s Sichuan province.
Earlier this year, the government approved a plan to consolidate the Chinese rare earth industry into six groups; the plan was formulated by MIIT.
Besides the abovementioned companies, the other three groups involved in the consolidation are Aluminum Corporation of China, Xiamen Tungsten Co Ltd and Baotou Iron & Steel Group Co Ltd.
WTO finds against China in rare earth dispute
The World Trade Organization issued a panel report on March 26 saying China’s export restrictions on rare earth elements as well as the minor metals of molybdenum and tungsten are incompatible with WTO rules.
The ruling marks a second successful challenge to China’s use of export quotas and tariffs as an industrial policy tool. In 2011, the United States, the European Union and Mexico won a WTO case against China’s use of export quotas on nine industrial raw materials, paving the road for the challenge against its rare earths policy.
China is by far the world’s largest producer of the 17 metals known collectively as “rare earth”, which are used to manufacture a range of crucial technologies including missile-defense systems and smartphones. China accounts for more than 90 percent of the world’s rare earth production, while its reserve of the minerals is about 23 per cent of the world’s total.
On March 13, 2012, the US, the EU and Japan initiated a complaint to the WTO regarding China’s export restrictions of the minerals. A panel was formally established on July 23, 2012, to look into the dispute after consultations failed to reach a resolution.
Yang Guohua, deputy director general of the Department of Treaty and Law at the Ministry of Commerce, said China is evaluating the panel report and has 60 days to decide whether to appeal to the WTO Dispute Settlement Body.
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