Market Focused On Potential WTO Investigation Into Chinese Rare Earth Trade Policies

By Adam Currie — Exclusive to Rare Earth Investing News

Market Focused on Potential WTO Investigation into Chinese Rare Earth Trade Policies

This week the rare earth sector was focused on the US, European Union, and Japan, which together formally requested that the World Trade Organization (WTO) investigate China's rare earth export restrictions. 

It is a move that many analysts feel will anger the Chinese government.

The dispute is one of several between Beijing and the other three economic powers, but is the first case to be jointly filed by the EU, US, and Japan at the WTO, an EU official confirmed.

China sent shock waves through the market in 2010 when it imposed export quotas on all rare earth elements (REEs). In 2011, it imposed an export quota of 30,184 metric tonnes, marginally reduced from 30,258 metric tonnes in 2010. Based on analyst calculations, the country's full-year quota for 2012 may hit approximately 31,130 metric tonnes.

Unfair advantage

EU Trade Commissioner Karel De Gucht commented that China's export quotas and export duties give Chinese companies an unfair competitive advantage in the REEs market.

“China's restrictions on rare earths and other products violate international trade rules and must be removed,” said De Gucht. “These measures hurt our producers and consumers in the EU and across the world, including manufacturers of pioneering hi-tech and 'green' business applications.”

In an interview with the British media, Konstantinos Adamantopoulos, a partner at law firm Holman Fenwick Willan, said,“[t]his will be a very fact-intensive case,” adding that he believes the case will run for some time.

“China will argue that the quota is so generous that it is not a quota at all. They will point to the fact that last year the quota was not used up,” explained Adamantopoulos.

The EU has stated that foreign companies pay up to twice as much as Chinese firms for rare earth metals, claiming that the restrictions benefit the Chinese industry alone and are therefore against WTO regulations.

Politically motivated

The move has been labelled politically motivated as it falls in the middle of a US election year. Critics have argued that US President Barack Obama is using the case as an opportunity to toughen his stance on Chinese trade practices amid criticism from Republican rivals that his administration has not been strict enough with Beijing.

Beijing has responded by stating that the curbing of exports was motivated by environmental concerns, adding that the country will defend itself in the dispute.

Miao Wei, China's Minister of Industry and Information Technology, said the export quotas are not trade protectionism and do not target any specific country, the official Xinhua news agency reported.

Meanwhile, Chinese erbium oxide prices continued to slide in last week's trading, with only a small number of transactions taking place. Market sources commented that 99 percent erbium oxide prices had been quoted in a range of RMB520,000 to 540,000/tonne, down from RMB560,000 to 580,000/tonne a week ago.

“It has been possible to source the oxide at RMB520,000-530,000/tonne from producers,” an executive at a southern supplier said. “Some offers are still at about RMB550,000/tonne,” the source continued.

Samarium prices remained flat throughout trading last week at RMB370,000/tonne.

Company news

Rare Element Resources Ltd. (TSX: RESannounced that it has started both separation testing and heavy rare earth testing of materials from its Bear Lodge project in Wyoming in an effort to determine the best methods for extracting rare earth from the property.

The company has signed an agreement with the Australian Nuclear Science and Technology Organisation ( ANSTO) to develop and test a process to produce separated rare earth products from concentrates derived from ore material at Bear Lodge.

Junior mining news

Ucore Rare Metals Inc. (OTC Pink: UURAF), a junior exploration company targeting rare earth minerals at a Southeast Alaska prospect about 40 miles southwest of Ketchikan, is building a new team of "mine-development specialists" with the hope of launching production as soon as possible.

Governor Sean Parnell and other leaders have been actively promoting the state's rare earth mineral potential, saying Alaskan rare earth prospects can help reduce China's dominance in global supply.