China Considers Further Rare-Earth Quotas
Dec 29 2010 - China is considering issuing export quotas for rare-earth alloys in a bid to further regulate the exports of the minerals used in a variety of high-tech industries. Officials have talked before about adjusting the quota system, and there is no sign a decision is imminent. But the government's current consideration comes as the rare-earths industry—and China's dominance of it—is under greater international scrutiny than ever before. Currently, China issues a single quota for rare earths, comprising 17 elements that are usually categorized into two kinds, giving exporters more incentive to ship the more precious and lucrative heavy rare earths overseas for higher returns. The new plans involving alloys and separate quotas for heavy and light rare earths, if finalized, would mean even stricter control by Beijing on the resources as it closes potential loopholes for exporters to sidestep regulations. (WSJ)
Background and Implications
Rare earths, the group of 17 elements that reside at the bottom of the periodic table, are vital ingredients in many of today’s most advanced products and sub-components. Since they are generally used in trace amounts, their cost impact to most firms has been minor despite rapidly increasing prices. However, due to the difficulty of their extraction and China’s firm grip on supply, they are a classic example of a “bottleneck” item, without which supply chains would grind to a halt. Such fears were intensified by China’s 40% reduction of its export quota in July and its weeklong ban on exporting the elements to Japan (the world’s biggest importer) in September 2010. High prices have naturally stimulated new potential sources of supply. Molycorp, an American mining firm, is planning to restart a California mine that closed in 2002 over environmental concerns. Lynas Corporation is planning to develop the Mount Weld area in Western Australia, the richest deposits of rare earths outside China. However, new capacity will take at least two years to come online and might take even longer.
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