China goes green with rare earth plea

China played the green card yesterday in an apparent bid to settle the on-going dispute over its throttling of rare earth exports, offering foreign firms the chance to co-develop the industry there in a more environmentally-friendly manner.

The People’s Republic has maintained for some time that its decision to limit the amount of the sought-after minerals which can be mined and exported in the country was taken to protect the planet and safeguard supplies for the future.

Ministry of Industry and Information Technology chief engineer Zhu Hongren pointed to the “disorderly development of the rare earth industry” to date, according to a China Daily report.

The recovery rate for rare earths is less than 50 per cent," he told a news conference yesterday. "In some illegal mines, the rate is as low as 20 per cent. So if we can't control and manage illegal activities, there will be significant damage to plant life and underground water supplies."

This stance has angered the US, Europe and Japan who have all filed complaints to the World Trade Organisation.

Critics argue that China is using the green argument as cover while it artificially drives up prices for the so-called rare earths, of which over 90 per cent of the world’s production comes from the People’s Republic.

The end game, they argue, is to force foreign manufacturers to relocate their manufacturing bases to the country in order to circumvent the rising costs of the minerals brought about by the tightening regulations.

At the same press conference, Zhu repeated China’s invitation to “advanced foreign companies with strong technology and capital” to jointly develop the rare earth industry in the country, but put a green spin on the offer in an apparent bid to satisfy the WTO.

"The US, Japan and Europe's [capabilities] in environmental management, recycling, technology research and development of high-end applications are welcome in China," he said, according to the Wall Street Journal.

This apparent olive branch could work in two ways, of course, cementing China’s green credentials with the WTO while encouraging more lucrative foreign investment in the country.

Ministry of Commerce stats published in the WSJ show China’s rare earth exports have dropped from around 65,000 tons in 2004/5 to just 30,000 in 2010/11, however the China Daily report claims that plenty of rare earth deposits exist outside of the People’s Republic.

The country has only 30 per cent of world reserves – down from 50 per cent two years ago – and in fact only half of its export quota was even met last year, the state-run newspaper claimed.

While these figures are likely to have been massaged, there are clearly other options for tech manufacturers who rely on the minerals to build their kit.

It all depends on whether China is really going to allow the price of its rare earths to rise so high that it becomes more economical for these customers to look closer to home for their supply. ®