China tightens rare earth stranglehold

China is seeking to enforce much tighter pollution standards for the mining of rare earth resources, which will further raise the cost to other countries and further increase China’s monopoly.

According to Xinhuanet Chinese authorities are considering the move with a government adviser proclaiming the standards aim to force producers to upgrade production techniques.

Industry insiders have also spoken out about how smaller competitors in the production market will be edged out in order to reduce production ,and therefore reduce the pollution that is produced in extraction of the metals.

“We heard the new standards will be strict, which will force uncompetitive miners out of the industry,” said Zhang Zhong, general manager of Inner Mongolia Baotou Steel Rare-earth (Group) Hi-tech Co.

Zhang also said that such new regulations will very likely increase the cost involved in rare earth production, consequently raising the price for exporters.

This will not be welcomed by other countries which are forced to rely on China’s near monopoly on the metals which are essential for many technology appliances, such as semiconductors.

Indeed, it was noted recently that Germany may consider legal action over any such restrictions by China, which holds 97 percent of rare earth metal reserves.

So countries exporting from China will not be happy to hear that in order to reduce the levels of pollutant, production will be heavily streamlined.  One expert suggested that producers with an annual capacity of less than 8,000 tonnes will be shut down altogether.  

China stopped issuing new licences to mine rare earth metals in 2006, and has since closed many mines, encouraging mergers and acquisitions instead.

It aims to cut the number of rare earth firms from 90 to 20 in the next five years.  The city of Baotou, which has the country’s largest rare earth reserves, has gone from 150 to just 18 recently.

At the sixth China-EU Business Summit Chinese in October Premier Wen Jiabao said that China is seeking a sustainable way of extracting rare earth reserves, maintaining that regulations are important, though the country would not be closing the market to exporters.