China denies any rare earth mineral export embargo

The New York Times report Wednesday suggested that a halt in shipments to the US was linked to the US Special Trade Representative’s decision Friday to investigate charges that China is illegally subsidizing its green tech sector.

Among the allegations brought by the United Steelworkers in its complaint to the USTR was that Beijing is restricting the export of materials needed for green technology in order to force US manufacturers to relocate in China so as to ensure access to such materials.

Deng Xiaoping, the leader who put China on the path to economic reform, once compared China’s reserves of rare earths to Middle Eastern nations’ supplies of oil. The recent reports of export restrictions have raised fears that Beijing might one day impose an OPEC-style embargo.

Chinese premier Wen Jiabao sought two weeks ago to allay such concerns. “China will not use rare earths as a bargaining tool” he pledged at a meeting with European business leaders. “China will meet domestic and world demand.”

Cutting back

It is clear, however, that China intends to cut back on the production and export of rare earths, a policy it has followed since 2007. “China will continue to restrict the exploration for and production and export of rare earths but these measures will not conflict with WTO principles” governing free trade, the Commerce Ministry statement said.

An article this week in the People’s Daily, the official mouthpiece of the ruling Communist party, insisted that China was wise to guard its rare earths.

“China now satisfies 90 percent of the world’s needs with 30 percent of the world’s total reserves, which is not sustainable in the long term,” the article argued.

The United States, Russia, and Australia all have significant reserves of rare earths, but mining them has proved uneconomical at usual world prices and environmentally harmful. Producers in those countries have closed their mines in recent years, leaving China almost alone as a supplier.

Ms. Zhang, the metals analyst, says she believes that market forces rather than government decisions explain interruptions in Chinese rare earth shipments that traders have reported.

Some of the 33 Chinese and foreign companies licensed to export rare earths cannot fill their orders because they have exhausted their quotas, she says. And with the price of some elements such as Lanthanum and Cerium six times higher than they were earlier in the year, smugglers are seeking quick profits by disguising shipments of such materials as ceramic or other industrial powders.

“Chinese customs are checking each export deal very carefully,” Zhang says.

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