China Tightens Grip on Rare Minerals

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"As OPEC has done with oil, China is now starting to flex its muscle."

China is set to tighten its hammerlock on the market for some of the world's most obscure but valuable minerals.

China currently accounts for 93% of production of rare earth elements—and more than 99% of the output for dysprosium and terbium, which are vital for a wide range of green energy technologies and military applications.

Deng Xiaoping once observed that the Mideast had oil, but China had rare earth elements. As OPEC has done with oil, China is now starting to flex its muscle.

In each of the last three years, China has reduced the amount of rare earths that can be exported. This year's export quotas will be the smallest yet. But what is really starting to alarm Western governments and multinationals alike is the possibility that exports will be further restricted.

Rare earths sell for up to $300 a kilogram for material like terbium, which is in particularly short supply. Dysprosium is $110 a kilogram. Less scarce rare earth neodymium sells for only a fraction of that.

(They are considerably less expensive than precious metals because despite the names, they are found in much higher quantities and much greater concentrations than precious metal.)

China's Ministry of Industry and Information Technology has drafted a six-year plan for rare earth production and submitted it to the State Council, according to four mining industry officials who have discussed the plan with Chinese officials. A few, often contradictory, details of the plan have leaked out, but it appears to suggest tighter restrictions on exports, and strict curbs on environmentally damaging mines.

Beijing officials are forcing global manufacturers to move factories to China by limiting the availability of rare earths outside China. "Rare earth usage in China will be increasingly greater than exports," said Zhang Peichen, deputy director of Baotou Rare Earth Research Institute.

The ministry did not respond to repeated requests for comment in the last eight days. Jia Yinsong, a director general at the ministry, is to speak about China's intentions Thursday at the Minor Metals and Rare Earths 2009 conference in Beijing.

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