May 19, 2011 / 11:25 AM / 8 years ago

China vows crackdown on rare earth smuggling

BEIJING (Reuters) - China will crack down on smuggling of rare earths and impose quotas for exports of rare earth alloy products as part of its campaign to reform the sector, vowing on Thursday to no longer turn a blind eye to “chaotic” export regulation.

The campaign against smuggling is part of China’s latest directive to strengthen its grip on the metals, which Beijing has said have been recklessly exploited, giving cheap supplies to foreign markets at the expense of the environment and of China’s own economic development.

China produces 97 percent of global rare earth supplies, giving it a stranglehold over the range of elements used in mobile phone handsets and hybrid car batteries as well as wind turbines and weapons guidance systems.

Beijing has already slashed export quotas by 35 percent for the first half of 2011, building on previous quota cuts, and the decision has choked off global supplies and driven up prices to record levels.

Beijing has angered many of its trading partners, especially Japan, where many manufacturers rely on Chinese rare earths.

The Chinese government warned that foreign firms which have used underhand methods to get around those quotas will now face a tougher time.

“Resolutely crack down on illegal exports and smuggling of rare earths,” said the directive from the State Council, or China’s cabinet, which was issued on the central government’s website (www.gov.cn).

It also warned against using false documentation and courier parcels to evade customs checks.

China will cap its total output of rare earth oxides at 93,800 tonnes this year, up 5 percent from last year, the government said in March. Illegal rare earth exports from China have amounted to as much as 10,000 tonnes of supply last year, according to some industry estimates.

The Ministry of Commerce (www.mofcom.gov.cn) said that from Friday alloy products containing more than 10 percent of rare earth metals would also require export permits under the government quota scheme.

China’s rare earth exports fell to an average of 1,159 tonnes per month in the first quarter of this year, down from a monthly average of 3,489 in the previous two years.

Reporting by Chris Buckley; Editing by Daniel Magnowski

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