China Responds to WTO with the Launch of a Rare Earth Industry Association?

For years there has been widespread speculation that China would establish an official organization to strengthen the bonds between its REE sector players to further solidify its dominance of the rare earth element (REE) industry and in particular the heavy rare earth element (HREE) industry. This day will arrive on April 8 when China is expected to formally launch its Rare Earth Industry Association according to a China Daily newspaper article published on March 31, 2012. It is anticipated that this Association will cover the majority of the companies in China’s REE industry supply chain and is an attempt to consolidate the industry which is currently poorly regulated in China. The State Council issued a document which said that government intends to consolidate 80% of the heavy rare earth mining assets in southern China in the three biggest companies over the next one to two years.

The major function of the Association will include:

• proving production guidelines, market research and channels of communications between China’s REE companies and the government;

• playing a critical role in influencing China’s REE import and export quotas;

• proactively dealing with trade disputes to guarantee Chinese interests are well represented; and

• being responsible for strengthening communications among REE companies, encouraging mergers and acquisitions in the sector.

Received emails from both Jack Lifton and Graeme Irvine providing some context and analyses of what the establishment of such an organization means for the rest of the world and the REE industry outside of China.

Here are Jack’s key takeaways:

• This announcement is about HREEs extracted from the ionic-clay deposits in southern China by the heap leaching method. The Chinese government feels that the cost of environmental remediation has not been realized yet and HREEs have been produced too cheaply. He predicts that China will not increase HREE production until environmental issues are dealt with.

• China’s demand for REEs and HREEs specifically is growing and when China has finished consolidating and remediating environmental damage, it might make the decision that it should seek a source of HREEs outside China as it may not be possible to augment or maintain current HREE production rates safely from ionic clays.

• The Chinese are worried about the security of their domestic HREE supply and they are going to be proactively addressing this concern. The establishment of the China Rare Earth Industry Association was in the works before the US filed its REE trade agreement dispute with the World Trade Organization.

Graeme also commented:

• The China Daily article had a clear message for the rest of the world: get a move on to bring in other REE supply.

• The Association indents to serve China first and companies or nations want REEs they should source them from elsewhere regardless of what the WTO decides.

• It’s no coincidence that China made this announcement right after the 3 complainants were filed in Geneva.

• The Chinese Association is intended to tell the Chinese industry what, where, when to produce and how much to supply, all under the control of Beijing.

The China Daily article can be read here. Now – if you want to join the first international rare earth organization that was created for our industry, has the only online library for REE intelligence, and participate in REE educational initiatives…go to www.REEWorld.com.