February 16, 2011

China Acts to Tighten Grasp on Rare Earths Production
Published: February 16, 2011
HONG KONG — Premier Wen Jiabao of China and his cabinet decided Wednesday to “streamline” the country’s rare earth industry by consolidating production, clamping down on illegal mining and clearly deciding which government agencies would oversee it, the government said.
State media reported last summer that two government agencies had drafted proposals for the cabinet calling for a few state-owned rare earth mining enterprises to take over the country’s legal and illegal private rare earth mines and consolidate production.
In a statement on Wednesday, the government did not specify how production would be consolidated. But Beijing officials and industry executives have been predicting that the government would order mergers to produce as few as three state-owned businesses that would coordinate production and prices.
China mines 95 percent of the world’s rare earths, a group of 17 physical elements that are crucial for smartphones, computers, compact fluorescent bulbs, medical imaging equipment, oil refining and many military technologies. Chinese officials have complained for years that vigorous competition among many small rare earth mining companies had kept prices too low — a popular phrase recently has been that China was exporting “gold for the price of cabbages.”
The statement on Wednesday was vague about how regulatory authority would be clarified, but noted that the ministry of land resources in Beijing had asserted regulatory control last month over 11 rare earth mining districts totaling 965 square miles in southern Jiangxi province. Local and provincial agencies previously oversaw the districts but struggled to control environmentally destructive illegal mining by organized crime syndicates, whose huge profits allow them to buy influence with local officials.
China has been reducing its annual rare earth export quotas since 2006, and particularly in the last two years. The Chinese government set off international alarm in September when it imposed an unannounced embargo for two months on shipments of raw rare earths to Japan during a territorial dispute. It halted some shipments to the United States and Europe as well for a week in October.