China: Rare earth export cuts protect environment

BEIJING (Reuters) - China’s decision to slash export quotas of rare earth elements was a necessary step to protect the country’s environment, commerce minister Chen Deming said following criticism from Japanese officials.

“Mass extraction of rare earth will cause great damage to the environment and that’s why China has tightened controls over rare earth production, exploration and trade,” Chen was quoted by state news agency Xinhua as saying on Saturday.

China issued export quotas for 30,258 tonnes by the end of July, down 40 percent compared to last year, following a nationwide campaign to consolidate the sector and clamp down on illegal production.

China has been steadily reducing export quotas since 2005 for rare earth elements, which consist of 17 metals used in crucial new green technologies like hybrid cars, wind turbines and superconductors, as well as in missile guidance systems and mobile phones.

Overseas buyers have expressed concern about China’s policies to restrict rare earth exports, which have driven up global prices, but Chen said China had no choice and its own market would also suffer as a consequence.

Rare earths are in increasingly short supply as world demand surges, with industry officials predicting a global shortfall of 30,000 to 50,000 tonnes by 2012.

China invested heavily in rare earth extraction technology in the 1990s and now controls more than 95 percent of recoverable reserves, mostly in the vast northern region of Inner Mongolia.

It has sought to strengthen its control over the global market, urging its biggest producer, the Inner Mongolia Baotou Steel Rare Earth to build strategic stockpiles.

China’s leading rare earth miners are also discussing setting a unified pricing mechanism in order to boost China’s global pricing power.

Reporting by David Stanway, Editing by Ron Popeski