China to change its export rules of rare earths following WTO ruling

June 5, 2014

On June 4, Reuters reported that China is planning to kill the controversial tariffs and quotas it had placed on the export of rare earth minerals. The change is because of a ruling by the World Trade Organization (WTO) that found the policies to be discriminatory.

China is responsible for more than 90 percent of global rare earth production, giving it a chokehold over the supply of 17 elements with a wide range of uses in high-tech sectors such as defense and renewable energy, Reuters reported.

The moves will likely drive up prices for rare earths and could also encourage growth for rare earth prospects outside of China.

The move to comply with WTO rules would reflect a tactical adjustment for Beijing, but its long-term plan to improve pricing power and gain market share in lucrative downstream industries is expected to remain unchanged, Reuters reported.

After complaining that global market prices were too low to cover the huge environmental costs of production, Beijing imposed tough output quotas and export tariffs in 2010 as part of a wider crackdown on the sector. Exporters have paid a tax of 15-25 percent this year.

The measures saw prices jump threefold, but a WTO panel said in March that the tariffs violated trade rules by giving domestic consumers an unfair advantage over foreign competitors.

Despite appealing the decision, Beijing expects to have little choice but to accept the ruling and could cancel export restrictions on rare earth, as well as tungsten and molybdenum, by next year, an industry source with ties to the government said. He declined to be identified as he is not authorized to speak with media.
 

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