Rare earths: China counter-attacks

In response to the case filed with the WTO by its trading partners, the United States, European Union and Japan, China’s State Council on Wednesday issued its first white paper on the controversial rare-earth metal sector .

Before the case actually goes in litigation at the WTO, China wants to justify its export quotas for rare earths, which have multiplied some of those metal prices by 10 times in the past 2 years. In its White Paper, the Chinese government explains its desire to consolidate an industry with a multitude of small companies not only extracting the rare earths materials, but also proceeding to their separation in appalling conditions for human safety and the environment.

With the creation of the China Rare Earth Industry Association, China tightens the screws. A broad movement of corporate concentration is already at work in Inner Mongolia, where the light rare earths are extracted, and in the Ganzhou region, known for its heavy rare earths. Smuggling is becoming increasingly difficult and therefore the export quotas will now become a real constraint for importing countries because they correctly reflect the total sales abroad, which was not the case before.

In its White Paper, China invites rare earths importers to develop alternative sources of supply. This is what is already happening in the United States, Australia, Vietnam and Madagascar. China also challenges its customers to “come and help us recycle rare earths.” It is not sure yet that this paper will influence the WTO, which has already condemned China for restricting the sale of other strategic metals. The environmental argument was rejected because China treated differently its home and international markets: rare earths prices are twice as high for export.

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