China cracks down on rare earth exports

A wary Beijing is eyeing new restrictions on the export of “rare earth” materials used in the manufacture of low-carbon energy technologies.

According to the state-owned China Daily, the country will slap additional quotas (30%) on rare earth exports in 2011 to protect the precious metals from over-exploitation.

“China is now facing the possibility that reserves of medium and heavy rare earths might run dry within 15 to 20 years if the current rate of production is maintained,” the Daily reported.

”And that is why export quotas will continue to be axed in the first half of next year.”

As The Hill’s Ben Genman points out, such a move is likely to increase fears in DC about access to supplies, while further “inflaming” US-China tensions over energy-related trade.

“China is the world’s dominant supplier of the materials that are used in a range of industries. They are key to the manufacture of energy technologies such as wind turbines and hybrid vehicles,” explained Genman.

“Accusations that China is blocking access to rare earths to benefit its domestic companies is among the matters under review in a wider US investigation into China’s green-energy trade policies.”

To be sure, the United States Trade Representative recently kicked off an investigation in response to a petition from the United Steelworkers union, which alleged that Sino-based subsidies and protections violated stringent World Trade Organization (WT) rules.

“China uses export quotas, taxes, and licensing procedures to restrict exports of these minerals to users in the US and other countries,” claims the petition.

“These restrictions raise prices for manufacturers outside of China, lower prices for those within the country and create a powerful incentive to shift production to China in order to secure necessary supplies.”

It should be noted that the US Department of Energy (DoE) is currently attempting to craft a rare-earth strategy based on domestic development, recycling and researching alternative materials.