China's fresh rare earths export quotas restore cuts

By @ibtimes on

China on Thursday issued a second batch of quotas for exports of rare earths this year -- virtually making up for previous cuts -- after its commerce minister met with his EU counterpart to discuss this and other thorny issues between the two trading partners.

The announcement of 15,738 tonnes in the second batch of quotas for 2011 adds to the first round of 14,446 tonnes announced late last year. It also comes just a week after the World Trade Organization ruled against China's curbs on a different mix of raw materials but which some trade partners say could set a precedent.

The WTO's ruling last week that China had breached trade law by curbing exports of eight raw materials led Europe and the United States to say that meant China should also be forced to increase exports of 17 rare earths.

We feel that a total of around 30,000 tonnes this year is a reasonable number given that Beijing probably does not want to cut the quota a lot, as that could bring more criticism from foreign countries, said an analyst at a foreign-invested fund in Beijing.

The latest issue brings China's total export quotas for the year to 30,184 tonnes, down slightly from 30,258 tonnes in 2010.

China, which accounts for some 97 percent of global output of the minerals crucial to global electronics, defense and renewable energy industries, had slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts. That move choked off global supplies, boosted prices and angered China's trading partners.

Beijing, which has defended its limits on exports on environmental and other grounds, said following the WTO decision that it would reform its exports of rare earths.

At a briefing on Thursday, Chinese Commerce Minister Chen Deming did not mention the new quotas but sounded a note of confidence, telling reporters he was not concerned about any possible WTO challenge to Beijing's rare earths restrictions.

The rare earth issue has not entered the WTO stage, Chen said during a joint briefing in Beijing with the visiting EU trade commissioner, Karel De Gucht.

I am not worried because we have already had some negotiation (with the EU), Chen said without elaborating.

At a later briefing, De Gucht said he was confident a negotiated solution could be achieved and would review China's new quotas. But he added that China should publish such quotas further in advance of when they are imposed.

The level of the quota is very important and also the predictability, he said. What the industry needs is predictability.

ENVIRONMENTAL IMPACT

Following the WTO's earlier ruling, De Gucht had said the EU, the United States and Mexico could consider legal action if China failed to cooperate.

On rare earths, what we have been saying is that we want to see applied to rare earth materials the principles that have guided the WTO panel when making the judgment on the raw materials case. We want the same rules to be applied, De Gucht told reporters after he and Chen read separate statements on the morning's trade negotiations.

China expressed its intention to appeal the WTO raw materials decision, De Gucht said, adding that the rules on trade in raw materials would be clear by year-end.

In its raw materials ruling, the WTO panel said China's domestic policies fell short of demonstrating that its export duties on the materials, such as zinc and bauxite, were to curtail pollution or conserve exhaustible natural resources.

China has taken steps to consolidate and rein in its polluting rare earths industry, which may bolster its case if the raw materials ruling is used as a precedent in a similar challenge.

China has said claims by countries that its export curbs on rare earths threatened their economic and national security were groundless, and that its quotas fell within WTO regulations.

China only intends to protect its environment and resources and has set tougher and tougher standards for irresponsible mining, and there is no intent to target any other countries, said Liao Yuling, a metals analyst with Huachuang Securities.

(Additional reporting by Aileen Wang in Beijing and Polly Yam in Hong Kong; Writing by Jason Subler; Editing by Ken Wills)

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