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International Trade: China Issues New Rare Earth Industry Rules; Production Capacity Could Be Cut 20 Percent

08/14/12

Source: BNA
Related Topics: International Trade

156 DER A-1
International Trade
China Issues New Rare Earth Industry Rules;
Production Capacity Could Be Cut 20 Percent
BNA Snapshot
China Rare Earth Rules
Key Development: New industry access guidelines could cut about 20 percent of rare earth production capacity.
Next Step: China says more stringent environmental protection standards will be enforced for mining, smelting operations.

By Michael Standaert

SHENZHEN, China—China's Ministry of Industry and Information Technology released new rules for rare earth producers on Aug. 6 that could lead to cuts in production capacity of about 20 percent as smaller players in the industry are forced out due to the more stringent requirements, according to official statements.

The new rules put minimum production requirements on certain types of rare earth mining. Mixed rare earth mining operations, for example, must produce no less than 20,000 metric tons of material per year, and smelting operations must meet an annual production volume of at least 2,000 metric tons.

A report from the state-run China Daily newspaper on Aug. 8 quoted Jia Yinsong, director of the MIIT rare earth office, as saying that about one-third of the rare earth mines and half of smelting operations would not meet the new rules and will have to halt production, leading to an overall production capacity reduction of about 20 percent.

According to the MIIT announcement, the rules went into effect on July 26.

The rules also require that wastewater treatment facilities, tailing ponds, and waste rock fields be installed at new mining operations before mining starts; and stated that detailed, more stringent environmental protection standards will be enforced for mining and smelting operations.

Jeff Green, a rare earth industry expert with J. A. Green & Company in Washington, told BNA Aug. 10 in an email that the policy was “just another example of the ability of the Chinese government to control the rare earth market through issuance of policies that have major impacts on the supply of these materials.”

Green added that the latest move “seems to be an effort to stop the continuing decline in rare earth pricing, which has had a negative impact across the market.”

On July 24, the World Trade Organization announced that it had established a panel to review China's rare earth export policies (141 DER A-2, 7/24/12) after complaints were lodged with the body by the United States, European Union, and Japan in March (49 DER AA-1, 3/14/12).

The three members submitted requests to China for WTO dispute consultations to address their claims that the restrictions “in the form of export duties, export quotas and other measures” violate WTO rules as well as specific commitments made by China as part of its 2001 WTO accession agreement.

According to the EU, China accounts for 97 percent of world production of these rare earths, which are key components in products such as wind power turbines, catalyzers, energy-efficient bulbs, engines for electric and hybrid vehicles, flat screens and displays (LED, LCD, plasma), hard drives, car parts, camera lenses, glass applications, industrial batteries, medical equipment, and smartphones.

For More Information
The MIIT announcement can be found here: http://www.miit.gov.cn/n11293472/n11293832/n11293907/n11368223/14767819.html.







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