China to step up crackdown on rare earth sector: ministry

SHANGHAI (Reuters) - China will step up efforts to eliminate illegal mining, production and smuggling of rare earth materials, while at the same time, encourage more high-end processing, the industry ministry said in new guidelines published on Friday.

China is responsible for more than 90 percent of the global supply of rare earth elements, a group of 17 metals used in high-tech and strategic sectors such as renewable energy and defense.

However, the country has spent the last decade trying to bring “order” to the sector by closing down illegal mines, restricting exports and domestic production. Small private firms have been shut down and control over the industry has been put in the hands of six state-owned mining groups.

Regulation and supervision in the industry had improved, but illegal mining and production continued to disrupt “market order” and damage the interests of legitimate enterprises, the Ministry of Industry and Information Technology (MIIT) said in a notice.

MIIT said it would step up efforts to prohibit illegal mining and recycling of rare earth materials, and ensure that unauthorized facilities are completely eliminated.

It will also establish a “traceability system” to stop buyers from using illegal materials and ensure that producers do not exceed the output target, and will also suspend licenses of law-breaking companies.

The rare earth industry has contaminated large amounts of land and water in major producing regions such as Inner Mongolia and Jiangxi, and the ministry vowed to provide more support to clean up the industry and reduce waste discharges.

The ministry said it would work to support the development of high-end rare earth products and establish a new research center to promote new applications and improve innovation and competitiveness.

China launched the crackdown on the rare earth sector in 2009, with authorities claiming that illegal activities drove down global prices and made it impossible to cover the huge environmental costs of production.

However, foreign governments accused Beijing of using its chokehold over global supplies to gain unfair economic and political leverage.

Beijing was forced by the World Trade Organisation to abolish rare earth export controls in 2014, but it continues to cap domestic production on environmental grounds.

China’s annual quota for rare earth mining stood at 120,000 tonnes in 2018, with smelting and separation capped at 115,000 tonnes.

Reporting by David Stanway, Editing by Sherry Jacob-Phillips