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(REUTERS) - A World Trade Organisation ruling against China's restrictions on raw material exports could force changes to some of its rare earth policies but is unlikely to yield the boost in exports of the metals that consumers want to see.
A WTO panel on Monday said China violated global trading rules by restricting exports of raw materials like bauxite, coke, magnesium, manganese and zinc, which inflated prices and gave domestic Chinese firms an unfair competitive advantage.
Rare earth metals were not part of Monday's ruling, but users of the crucial group of 17 elements used in the renewables and high-tech sectors hope that China will also scrap export limits on these commodities, leading to higher volume and lower prices.
They are likely to be disappointed.
"It is still too early to say what the impact will be but I can't see it having a big impact on prices -- the main issue will still be supply and demand," said Vivian Pang, an analyst with the Asian Metal consultancy in Beijing.
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The reason, say analysts, is that even if China removes export quotas, it is unlikely to lift its production limits, which are meant to limit environmental damage from rare earths mining and keep prices -- and profits -- high.
China, which produces about 95 percent of global rare earth supplies, capped production at 93,800 tonnes in 2011, up only 5 percent compared with the year before despite soaring demand. It began a nationwide inspection at the end of August to stop rare earth miners from breaking the cap.
While the ruling could be a setback for China in its efforts to clean up and cash in on its rare earth reserves, its overall strategy need not change, said Tu Xinquan, associate director of the China Institute of WTO Studies.
"There are other ways it can meet its objectives," he said, referring to the output limits.
CHALLENGES ON RARE EARTH EXPORTS
A number of U.S. lawmakers urged the United States to use the WTO decision to launch a new case to force China to lift its rare earth export restrictions.
Some producers said they were optimistic the action would change Chinese policy.
"The decision of the appellate body is a huge victory for the United States," said Michael Silver, chief executive of American Elements, a U.S.-based rare earth processor.
"It confirms the existence of the two-tiered price structure that has caused so much concern."
