An amazing turnaround

Heidi Gmuer, Sydney

As China's export restrictions on rare earths intensified, exploded prices fell and Western countries in panic. Now Beijing bows to the verdict of the World Trade Organization and picks it up - and what happens? Nothing.

The defense of Beijing seemed at best original. After the US in March 2012 at the World Trade Organization (WTO) Had filed a complaint against China's export restrictions on rare earths, fought back the Middle Kingdom, among others, the argument, that this served to protect its environment. To export duties are required, to human, to protect animal and plant life from pollution, would be caused by the promotion of these minerals. The export quotas have introduced it, meanwhile,, about the illegal production and smuggling curb and thus ensure the conservation of exhaustible resources.

Play of market forces

There are However, WTO rejected this argument lines, especially since China was guilty of proof, that the chosen measures the alleged targets were actually conducive. She came to the conclusion rather, that export restrictions on domestic production of rare earths protected and strengthened their consumption for the production of higher quality products in their own country. As before, China consumes about 70% of world production. After Beijing was last August but failed in an appeal, has now joined the government in early year the verdict abolished the export quotas and as of January; the tariffs will fall only in May, according to a spokesman authorities.

It is noteworthy, the global market has not responded: namely, as well as not. The price of rare earths, measured on Bloomberg's price index, remained more or less stable in January, continue with a slight downward trend (cf.. Graphic). This is in sharp contrast to the reaction of the market a few years ago. 2010 China had imposed a temporary ban on exports to Japan and 2011 reduced its export quotas worldwide. As a result, prices exploded. Western industrialized countries fell downright panic, because they were highly dependent on imports from China. After all, the 17 Elements, belonging to the rare earths, essential for the production of a variety of high-tech products, be it mobile phones, Flat screens or laptops, Wind turbines, Hybrid cars or modern weapons systems.

That it so quiet after turning in China remained, has to do with, that the usual market forces have already done a great job in recent years. The higher prices due to Chinese export restrictions, but also an expected increase in demand had mining companies including in the USA (Molycorp) and Australia (Lynas) called into action and lured into production.

Stock prices in the cellar

Meanwhile, the chemical company Rhodia made in La Rochelle, France for the first time in a big way to the recycling of batteries for the recovery of rare earths. China's share of global production declined because also of some 98% in 2010 on currently 90%.

The concern of the buyer to have enough supplies had an additional effect, namely innovation, which allowed, to reduce the consumption of rare earths in certain products or substitute even. In China, the export quotas had meanwhile the illegal production and smuggling - contrary to the intentions communicated Beijing - hardly hindered. Experts estimate, that still 2011 around 30% -50% of the demand has been satisfied on the world market with smuggled goods from China.

All in all, joined the real - or imagined - gaps in relatively quickly and also decreased the demand; China last longer even drew its export quotas from - so it was just about the last year 28 000 t exported, while the rate of about 30 000 t would have been. Little surprise,, had little effect its abolition. The price was over these developments since the record high in 2011 indeed sunk so low, that has already been speculation about an impending bankruptcy of the American company Molycorp; had its share 2011 nor 74 $ worth, it is now over for something 70 Traded cents. The fall in prices of rare earths has also shares with Australia's Lynas sent deep into the basement - over-discharging. $ 2.50 in 2011 currently on austr. $ 0.045.

That the abolition of export quotas had no effect on the world price, is hardly surprising result of these developments. Analysts, however, do not rule out, that the price pressure further increased, when China announced as abolishing the export duties in May.

Serious environmental problems

On one point, the WTO, China had incidentally can not contradict: The promotion of the ore and the subsequent extraction of rare earths pose serious dangers for man and environment. That was one reason, why China ever had a virtual monopoly can build; it can not produce just about cheaper than other countries, because labor is cheaper, but also, because its environmental requirements are less stringent than elsewhere. Even Molycorp processed part of its funded in the USA ore in China. Lynas, meanwhile, has outsourced the refining to Malaysia.

However, the WTO recognized at the same time, that China has increased substantially in recent years its efforts in this area. Does the Chinese government Ernst and uses its energy future rather than export- more on environmental controls and combating illegal promotion of and Trafficking, this should in turn support the world market prices - for the time being of the rest of the world will not avoid rare earths from China.


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