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WTO takes China to task on rare earths export restrictions

26th March 2014

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – The World Trade Organisation (WTO) on Wednesday took China to task on several counts of export restrictions on rare earths, tungsten and molybdenum, citing three counts where a panel had found that China breached its WTO obligations.

For rare earths, used to manufacture permanent magnets, catalysts, metal alloys and consumer electronics, prices rose dramatically in 2011, when China clamped down on exports. Prices for rare earths had since fallen significantly and were now closer to levels witnessed before the global economic downturn that began in 2008.

The WTO panel had found that China imposed three distinct types of restrictions on the export of rare earths, tungsten, and molybdenum, by imposing duties (taxes) on the export of various forms of those materials; by imposing an export quota on the amount of those materials that can be exported in a given period; and it imposes certain limitations on the enterprises permitted to export the materials.

The Chinese restrictions included export duties, export quotas, minimum export price requirements, export licensing requirements and additional requirements and procedures regarding administering the quantitative restrictions.

The WTO reported that China argued during consultations that the restrictions were related to conserving its exhaustible natural resources, and were necessary to reduce pollution caused by mining.

However, the US, the European Union and Japan complained that the restrictions were designed to provide Chinese industries that produce downstream goods, with protected access to these raw materials.

ALTERNATIVE SUPPLIES

China accounted for about 95% of the global supply of rare earths in 2012, Pennsylvania-based Meadowlark Technical Services consultant Ted Giese told Mining Weekly Online.

This was, however, expected to fall to about 60% by 2020, as new non-Chinese production of rare earths comes on stream, with Molycorp Inc, in the US, and Lynas Corp, in Australia, already starting-up the first phases of their rare earths production.

“New producers from other regions are challenging China, which currently dominates in the production and supply of rare earths, as well as in many downstream product areas,” Giese said, citing a January Materials Technology Publications report on the global rare earths industry.

This global diversification will potentially result in greater stability in terms of both supply and prices, albeit at lower prices.

Current world demand for rare earths is estimated to be 125 000 t in terms of rare-earth oxides and this was expected to grow to 160 000 t by 2017.

Chinese rare earths producers were suffering from lacklustre global demand as the global economy was struggling to gain momentum, which had squeezed margins at many Chinese producers. Faced with growing alternative sources of rare earths, prices could drop further and make many new projects outside of China less viable.

Black-market smuggling of the metals has also had a negative impact on Chinese margins.

There had been considerable criticism of China's poor environmental record with regard to the mining of rare earths. Part of the problem could be attributed to widespread illegal mining practises that the Chinese government was now trying to eliminate through its rationalisation and consolidation programme.

The Chinese Industry and Information Technology Ministry estimated that in 2012, illegal mining of rare earths amounted to more than 40 000 t, and the illegal smelting and separation of rare earths products amounted to more than 50 000 t.

To counteract this, the Chinese government was making a concerted and sustained effort to crack down on illegal rare earths mining and to improve the environmental and safety compliance of the Chinese rare earths industry.

Meanwhile, legitimate producers were being forced to adopt more stringent environmental practises or face severe penalties.

Giese points out that an environmental issue that could add to the costs of new entrants to the rare earths market is the fact that several kinds of rare earths generate radioactive waste when processed, requiring the waste to be stored in costly long-term facilities.

“There can be up to 0.1% of thorium oxide (ThO2) in bastnasite ore, and 4% to 10% ThO2 and 0.1% to 0.5% uranium oxide in monazite and xenotime ores,” he said.

Monazite and xenotime are of particular interest to potential new producers, owing to them containing higher levels of the more valuable heavy rare earths. The cost of disposing of radioactive waste streams can be significant, as they require long-term secure storage, and this needs to be factored into the overall costs of establishing commercially viable rare earths operations.

Edited by Creamer Media Reporter

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