China's rare earth monopoly continues to unsettle world

Rare earths, the minerals needed for development and construction of anything from alternative materials to cars to hard-disk drives, are currently China’s monopoly. It has recently come to light Japan and Australia are hot on Beijing’s tail but for now China appears to be exercising its power.

According to a report in China Daily, Chinese Ministry of Commerce officials are planning to cut export quotas in 2011 by up to 30 percent to keep its current stranglehold and maintain supplies. There is also word from the far east that China has placed an export block on Japan. 

At the moment China is very much top brass in rare earths, producing roughly 95 percent of the world’s supply. It has reportedly reduced its export quota this year to 22,022 tonnes down from 28,298 tonnes in 2009. Chao Ning, quoted in China Daily, allegedly revealed that known deposits of rare earths are down from 39 million tonnes in 1996 to 24.5 million last year – a steep decline.

According to Chao, at the current rate of production, reserves will last between 15 to 20 years at most – and that he, and China, are more than aware of efforts by other countries to step up rare earths mining.

Japanese companies, says the Taipei Times, claim the supposed export ban was geopolitical – the suspension came shortly after a Chinese fishing boat was found near disputed islands.

According to China there has been no official ban on exports. But the Japanese disagree; shipments have apparently been stalled as of yesterday, the 19th October, and an anonymous Japanese importer confirmed no new supplies had arrived. 

Organ of the People’s Republic of China, People’s Daily, has published an official denial from the Ministry of Commerce. It is “false” and “groundless” to suggest China will reduce its exports by 30 percent. “China will continue to supply rare earth to the world.”

However it will take “restrictive measures” to prevent exploitation, production and export of rare earth to “protect depletable resources and sustainable development.” Cutting exports is certainly an effective restrictive measure – what else? Xinhua has previously published a statement from premier Wen Jiabao, saying that “China has not and will not obstruct the trade of rare earths.”

While the controversy lies with negotiations between Japan and the PRC, the West is also worried. Germany is set to appeal to the European Commission and the World Trade Organization about Chinese export cuts. The business community, reports the New York Times, has united to hold a conference on the issue in Berlin.

Germany’s strong economy is largely export driven and much of its production relies on rare earths. Despite defensive chest-beating from China, German businesses are calling the restrictions an “unfriendly act” – worrying indeed for a country that relies on up to 5,000 tons of rare earth imports a year. 

German Chancellor Angela Merkel has joined the debate. She has been quoted as saying: “Considering the raw-materials policy of a country such as China, it’s urgently necessary to make capital available among European partners in order to secure long-term supplies. That’s not only a reference to natural gas and oil but goes far beyond that to include minerals.”

Perhaps the West would have a less hostile bed-fellow in Australia, which has discovered a strong possibility of a surplus of rare earths deep in its surrounding sea bed. Or Japan and Mongolio, frustrated with reliance on the PRC, have partnered to explore other options for rare earths mining and supplies. Either way – China has the monopoly, for now, and the ball is very much in Beijing’s Olympic Park.