Real changes in China’s exports of rare earths to come in May 2015

The recent move to abolish export quotas on rare earth metals is unlikely to reduce prices, and the government plans several things to keep prices up after the required reduction in export duties later this year

The Dollar Business Bureau Quartz-The-Dollar-Business This week, China ended a quota system on exports of rare earths following a World Trade Organisation (WTO) panel ruling last year. However, real changes can be felt only after May this year when the government makes key changes in duties on exports of rare earths. China is the world’s largest producer of rare earths which are key raw materials used to make electronic goods, computers and several other high technology goods. China’s share of world’s rare earth production stands at around 90% and India is also dependent on imports of such metals from China and other countries for the production of products such as CFLs and LED Lighting. However, China imposed several trade restrictions after prices declined in recent years. The Chinese government said that it had imposed restrictions to conserve its natural resources, but a WTO investigation found that the move aimed to increase prices of rare earths. WTO said that China imposed three broad restrictions on the export of rare earths, none of which concurred with the concerns over depletion of natural resources. In a ruling, it asked China to remove the restrictions. This week, the Chinese government took the first step by removing the limitations on the companies that export the materials. Earlier only 28 Chinese companies could export rare earths, but now any company with an export contract can export rare earths. While this is expected to increase supplies in the international market, prices are unlikely to change due to several mergers among rare earth producers that began in China last month. Moreover, the quota on export of rare earths have been above total rare earth exports by China in the last few years, according to official sources. However, the real change will come when the government removes export duties of around 15 – 25% on rare earths in May or June this year, according to the state news agency in China. Meanwhile, the Chinese government is expected to cap domestic production and introduce stringent environmental standards to prevent excess production of rare earths in China.