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WTO’s ruling on the ‘rampant illegal rare earth production’ in China force rapid regulation changes

Posted on August 15, 2014 by Hongpo Shen


As a result of the WTO Appellate Body issued its report on August 7th, while it has upheld a ruling that China violated international trade rules with restrictions on the export of rare earths, China’s Ministry of Commerce (MOFCOM) responded to this ruling with a statement saying that it regretted the WTO’s reaffirmation of its earlier ruling, according to the Xinhua News Agency. The MOFCOM also reportedly vowed to study the decision and adopt measures which are in accordance with the WTO rules in the future. Despite the MOFCOM has not yet announced its countermeasures, however, I think that it’s difficult to avoid the removal of export quotas and tariffs on rare earth since next year.

“For a WTO rare earth lawsuit case, the state has adopted a series of policies and measures to better coordinate rare earth development”. Gan Yong, deputy director of the Chinese Academy of Engineering and head of the Association of China Rare Earth Industry (ACREI), said at the Baotou China Rare Earth Industry Forum. “To remove rare earth export quotas as an industrial management mechanism, it would be more difficult for the Chinese government to regulate the industry. Therefore the government needs to formulate new countermeasures to ensure the rare earth operation in accordance with the law and regulations,” Gan Yong added.

The Chinese authorities will carry out a series of new measures in the next few months, including to further increase resource taxes on rare earth sales again in order to prevent rare earths from being exported at unreasonably lower prices as well as efforts to stabilize the country’s rare earth market, according to a report in the state-run China Securities Journal reported on Tuesday, citing an unnamed authority.

“China set its production quota for 2014 at 105,000 tons, of which the production quota for the rock-type light rare earths concentrate was 87,100 tons and the ion-absorption-type medium and heavy rare earths was 17,900 tons. Latest statistics showed that the total actual domestic demand for the rare earth concentrate should be stood at approximately 151,740 tons (includes approximately 125,168 tons of rock-type light rare earths concentrate and approximately 26,572 tons of ion-absorption-type medium and heavy rare earths), therefore the shortage of rare earth concentrate should be stood at approximately 46,740 tons.” said Ma Rongzhang, secretary general of the ACREI at the Baotou Forum.

The ACREI also said on the Baotou Forum that the country’s annual surplus of lanthanum oxide and cerium oxide are approximately 50,000 tons, while the surplus of yttrium oxide is approximately 10,000 tons per year at present. Moreover, the trend of price declined has continued into this year while the average price of rare earths has fallen back to the levels of 2010. Clearly which means China’s illegal rare earth operation is still rife. The ACREI estimate that unlicensed and illegal production account for approximately 50% of China’s rare earth total output at present.

China produces 90% of the world’s supplies of rare earths. Despite the high demand for rare earths which are used to make a range of high-tech products from cell phones and renewable-energy to hybrid cars and defense industries. However, the high profits from illegal mining have led to collusion between local government officials and illegal miners, “black interest chain” and the excess capacity are still two major reasons causing low rare earth prices at present.

In order to cracking down on the “black interest chain,” The MIIT will work together with several other departments and ministries under the State Council to launch a new round of crack-down on rare earth “black interest chain” since August 15th, an official from MIIT saying that the strength of this crackdown will be heavier than that of last year with a majorly target of crack-down on collusion.

China lost the WTO rare earth case, which is forcing the country speed up to improve its regulations on these rare earths minerals while to curb environmental degradation and protect resources. However, China currently sits at a difficult inflection point after WTO’s final ruling on rare earth due to the rampant illegal rare earths production.


- See more at: http://investorintel.com/rare-earth-intel/china-currently-sits-difficult-inflection-point-wtos-final-ruling-rare-earth/#sthash.BkMiua4w.dpuf