October 21, 2010

China May Widen Minerals Embargo: Officials

Adding to its embargo of mineral shipments to Japan, the New York Times reports that China has now also blocked some of those mineral shipments to the United States and Europe, according to three industry officials this week.

The embargo, involving rare earth minerals that are crucial to making many advanced products, could further intensify the already increased trade and currency tensions with the West. Until recently, China generally sought quick and quiet accommodations on trade issues. But the interruption in the mineral supplies is the latest sign that Chinese leaders are willing to use their growing economic influence.

One of three rare earth industry officials, all of whom wished to remain anonymous for fear of business retaliation by Chinese authorities, said the "embargo is expanding" beyond Japan.

Chinese customs officials imposed the restrictions on Monday morning, hours after a top Chinese official called on international news media Sunday night to condemn United States trade actions.

Ninety-five percent of the world's rare elements are mined in China, which are used widely in many commercial and military applications, and are vital to the manufacture of products as diverse as cellphones, wind turbines and guided missiles. A restriction of Chinese minerals is likely to be greeted with alarm in the West, particularly because Western companies generally keep much smaller stockpiles of rare earths than Japanese companies.

China experts said on Tuesday that Beijing's forceful stance on rare minerals might also signal the superiority of economic nationalists, noting that the Central Committee of the Communist Party assembled over the weekend.

The NY Times reports that in recent weeks, a few rare earth shipments to the West have been delayed by customs officials, according to industry officials in China, Japan and the US. But new restrictions on exports have been imposed on Monday morning.

Industry experts said there had been no signal from Chinese officials on how long rare earth shipments intended for the West would be held by China's customs. A few shipments are still being allowed out of the country for unknown reasons, according to a fourth rare earth industry official on Wednesday.

China's official stance on the embargo remained unclear on Wednesday. In an apparent reference to a report on Tuesday in the official China Daily newspaper, the commerce ministry said the report, predicting a decline of up to 30 percent in rare mineral export quotas next year, was "totally groundless and purely false," and added that no decision had been made yet on future quotas.

The statement also said that, "China will continue to export rare earth to the world, and at the same time, in order to conserve exhaustible resources and maintain sustainable development, China will also continue imposing relevant restrictions on the mining, manufacture and export of rare earths."

Japan's Kyodo news agency reported Wednesday that an unidentified Chinese source said that rare earth shipments to the US and Europe were being held by customs officials for tighter inspections, one of the reasons that they also had given in blocking shipments to Japan for the past month.

But John Clancy, trade spokesman for the European Commission, said in a statement obtained by the NY Times on Wednesday that, "at this time, we cannot confirm claims made by European industry officials in media reports of China blocking rare-earth shipments to the" European Union.

The signals of a much stricter stance on Chinese trade came after American trade officials announced on Friday that they would investigate whether China was breaching World Trade Organization rules by subsidizing its clean energy exports and limiting clean energy imports.

Despite a widely confirmed suspension of rare mineral shipments from China to Japan, now in its fourth week, Beijing has continued to deny that any embargo exists.