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Trade Battle Brewing Over Rare Minerals

March 14, 2012

A battle is brewing over the global supply of 17 rare earth minerals reports the Associated Press this week. The United States, the European Union and Japan filed complaints on Tuesday with the World Trade Organization claiming that China has set limits on the export of rare earth minerals.

“China´s restrictions on rare earths and other products violate international trade rules and must be removed,” Karel De Gucht, EU trade commissioner, said in a statement. “These measures hurt our producers and consumers in the EU and across the world, including manufacturers.”

Currently China produces more than 95 percent of the world´s rare earth minerals, and this includes a virtual monopoly on 17 rare earth minerals. The Chinese imposes export quotas and limits the market supply of the minerals. Among the materials is tungsten, a very hard metal, which is used in lighting technology, electronics and aerospace. At present China products 90 percent of the world´s commercial supply of tungsten.

Other materials include neodymium, dysprosium and molybdenum, a metallic element used in steel production. These elements are crucial for many “green” businesses.

China has about 30 percent of rare earth deposits and now accounts for 97 percent of the world´s production of such minerals.

These minerals are essential for the production of many high-tech products including hybrid automobiles, flat panel TV sets, mobile phones, camera lenses and even weapons systems. China has been cutting the export quotas in part citing growing demand at home, as wells for environmental reasons.

The United States has charged back that this is in an unfair trade practice, one against eh rules established by the WTO, for which China is a member. The EU Trade Commissioner has also noted that export quotas and export duties are giving Chinese manufacturers and other companies an unfair competitive advantage.

The 17 rare earth minerals are actually at the bottom of the periodic table, and while called “rare” these are actually that rare in the natural world, but there are difficulties in mining these safely.

The White House on Tuesday called for China to lift export limits.

“We want our companies building those products right here in America,” Obama said to reporters. “But to do that, American manufacturers need to have access to rare earth materials which China supplies. Now, if China would simply let the market work on its own, we’d have no objections.”

The President added, “Currently are preventing that from happening and they go against the very rules that China agreed to follow.”

U.S. trade representatives further claim that American workers and manufacturers are being hurt, not only in established sectors but also budding companies. This is also not the first time China has tried to leverage the market.

In 2010, China temporarily halted shipments of some rare earth minerals to Japan, which prompted a sharp spike in prices.

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Source: RedOrbit Staff & Wire Reports



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