China cuts rare earth export quotas

China cut its first batch of rare earth export quotas for next year by more than one-tenth, in the face of a threat by the United States to complain to the World Trade Organization over the export limits.

China's Commerce Ministry allotted 14,446 metric tons of quotas to 31 companies, which was 11.4 percent less than the 16,304 metric tons it allocated to 22 companies in the first batch of 2010 quotas a year ago.

The ministry said in a short statement that it had added more producer companies to the quota list, but has cut volumes allocated to trading companies for the metals, which are used in high-tech goods.

The export quotas were based on export volumes from the beginning of 2008 to October 2010, it added, without giving details.

China produces about 97 percent of rare earth elements, which are used worldwide in high tech, clean energy and other products that exploit their special properties for magnetism, luminescence, and strength.

The decision to cut export quotas and raise tariffs has inflamed trade ties with the United States, European Union, and Japan in particular.

Last week, the U.S. Trade Representative office said China had refused U.S. requests to end export restraints on rare earths that have alarmed trade partners. The U.S. representative and that Washington could complain to the WTO, which judges international trade disputes.

China's Commerce Ministry has yet to respond to that threat.

Foreign Ministry spokeswoman Jiang Yu declined to comment today when asked about it at a regular news briefing, referring the question to "relevant departments." She did not elaborate.

The issue will add to already strained Sino-U.S. ties, which have been battered this year by arguments over everything from Tibet and Taiwan to the value of the Chinese currency. Chinese President Hu Jintao visits the United States next month.

Japan has been hard hit by the export curbs. Japanese imports of rare earths shrank further in November, reflecting the impact from China's de facto ban on shipments of the minerals which was lifted late last month.

Japanese companies had complained of restrictions on shipments of the metals, vital for making auto parts and high-tech products, by Chinese customs officials following a spat over disputed islands in the East China Sea which led to a de facto suspension by Beijing on exports from late September.

China is still exporting small volumes of rare earth to Japan. Analysts have suggested the de facto ban was probably because of differences in the way rare earths are categorized by each country, as well as a dribble of imports that had previously been delayed.

The European Union has also expressed concern at China's limiting of rare earths' exports, though the bloc's trade commissioner said earlier this month China had reiterated that rare earth supplies would be sustained.

China says its curbs are for environmental reasons and to guarantee supplies to domestic industrial consumers, but it has also insisted its dominance as a producer should give it more control over global prices.

Beijing has been trying hard to impose discipline on its chaotic rare earth sector and is expected to establish a rare earth industry association by May next year, said Wang Caifeng, an official with the Ministry of Industry and Information Technology, speaking at a conference today.

Courtesy: Cnet

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