The World Trade Organization (WTO) rejected Chinas appeal
over its rare earths export quotas dispute in August, following
a ruling released in March 2014, which condemned Chinas
quotas as violating free trading principles.
The dispute goes back to 2012, when
a coalition formed by the US, EU and Japan filed a complaint
with the WTO, claiming that the quotas violated international
free trading rules.
The coalition protested that the
export restraints were set by China to artificially increase
world prices for rare earths, while artificially lowering
prices for Chinese producers.
In a recent statement, US
Representative, Mike Coffman, applauded the WTOs decision
saying: By applying export quotas, China has consistently
attempted to enhance its own manufacturing base at the expense
of companies in the US and in the rest of the industrialised
In August, Japans Ministry of
Economy Trade and Industry said it hoped Chinas exports
to Japan could resume soon, after the ban imposed by China in
2010, following a territorial dispute over the Senkaku
On the WTOs final ruling, the
Ministry of Commerce of the Peoples Republic of China
(MOFCON), said in a statement that it would strengthen
management for resources products in the way that conforms to
WTO rules, promote resource protection, uphold fair competition
and realise sustainable development.
China appealed against the
WTOs verdict in April, claiming its export policies were
justified by the necessity to protect natural resources.
I think the government had
foreseen the possibility of the WTOs ruling. Its a
predictable result. Its a good chance for us to protect
the rare earths resources, Zhang Anwen, deputy secretary
of the Chinese Rare Earths Association (CREA), said at the
sixth Baotou Rare Earths Industry Forum in August.
We could strengthen ecological management, develop
bigger ecological groups and reinforce the industrial
concentration, he added.
Development of downstream applications
CREA said at the Forum that the
rare earths market is not balanced, having an excess of 10,000
tonnes yttrium and 50,000 tonnes lanthanum and cerium.
Gan Yong, CREAs chairman,
said that the rare earths industry should focus on expanding
the range of applications of light rare earths products and
yttrium in order to reduce inventory.
Earlier in August, Inner Mongolia
Baotou Steel Rare Earths Hi-Tech Co. signed a strategic
cooperation agreement with high-tech company Sinopec Catalyst
Co. and the Baotou Rare Earths High-Tech Industrial Development
Zone to develop rare earths-based catalysts in oil refining,
de-nitration and cracking processes.
Zhang said that oversupply exists
not only in the raw material market but also in rare
earths-based applications, including permanent magnets,
luminescent powders, hydrogen storage and catalysts.
Rare earths polishing powder
production amounts to 60,000 tpa, much larger than both
internal and global demand put together, with demand amounting
to 5,000 tpa in Japan and 2,000 tpa in the US.
The current oversupply has been
impacting rare earths prices, which reached their lowest levels
prior to 2010, with a further fall of 148 points in the price
index as of August 2014, according to CREA.
Prices for cerium, lanthanum and
ytterbium fell by 40% year-on-year (y-o-y) in the second half
According to figures from the CREA,
rare earths export volumes in 2013 rose by 38.3% y-o-y but
export values fell by 36.7% in the same period; industry
officials said they believe the decline in export values is an
Jia Yinsong, head of the rare
earths office at Chinas Ministry of Industry and
Information Technology (MIIT), said that small-scale illegal
mining has also impacted prices and that the government is
adopting new policies to regulate the industry.
In August 2013, the MIIT and other
ministries, including the Ministry of Public Security, the
Ministry of Land Resources and the Ministry of Environmental
Protection, carried out a three-month investigation to combat
illegal production of rare earths in the country.
Following the investigation, 126
rare earths firms saw production suspended and 161 firms had
their production licenses revoked. In the city of Ganzhou, in
the Jiangxi province, more than 40 officials were found to be
involved in illegal rare earths mining and processing.
The campaign estimated a total of
19,000 tonnes of rare earths came from illegal mining
Keeping pressure up to combat
the rare [earths] black chain is conducive to further regulate
rare earths market stability, Jia said at the Forum.
Since earlier this year, the
Chinese government has also been supporting the formation of
large rare earths groups, promoting vertical integration and
consolidation to reduce competition in the market and improve
Beijing approved several of these
rare earths groups in late July, including the North China
Baotou Steel Rare Earths Group, led by the worlds largest
producer, Inner Mongolia Baotou Steel Rare Earths Hi-Tech
Other major producers, including China Minmetals and
Aluminium Corp. of China (Chinalco), are also forming