China Restricts Again

Fletcher said issues of quality of life, environmental quality and economic growth will “dominate our discussion in the years ahead”. Also, China and the US “must collaborate to figure out how to deal with these problems in the future”.

Two days into the new week, and two days of more news of environmental quality of life restrictions in China that are going to have a big impact on the rare metals sector, both in the immediate time frame and in the long term.  The USA and the EU are both preparing to file a new joint World Trade Organisation complaint over China’s export restrictions and taxes on rare earth elements, supposedly no later than in November. But with China’s expanding environmental crackdown, now expanding into China’s notorious coal industry, China adds weight to its environmental defence case.  Anyway, by the time the WTO gives its verdict China might have very little REEs to export, if China’s Ministry of Land and Resources actually implements establishing strategic reserves of rare earth resources.

Below, recent developments as reported by China Daily.

Cities relying on natural resources must diversify to spare environment
TAIYUAN – Chinese cities whose economies rely largely on the exploitation of natural resources must seek a new source of development to boost the nation’s growth, government officials and scholars said at an Expo Central China 2011 forum on Sept 26 in Taiyuan, Shanxi province.

Around 120 cities across China have a resource-based economy, accounting for around 18 percent of the total number of Chinese cities, according to Peng Sen, deputy director of the National Development and Reform Commission (NDRC).

A pilot economic zone was set up in coal-rich Shanxi at the end of last year to change the province’s resource-based economic model.

—-Kong Jingyuan, director-general of the department of comprehensive reform of the economical system in NDRC, called for the “socialization of resource industries”. This would allow all of society to “share the gift of natural resources by fair competition, so capital that focused on resources before can be shifted to other sectors, such as public service and environmental protection, which are equally important, if not more important than conventional resources sectors”.

—-Despite current problems, international cooperation provides a solution. Jerald Fletcher, a professor of energy, environmental and resource economics at West Virginia University, sees a bright future for China, as “some of the issues are indeed difficult, but definitely surmountable”.

Fletcher is the director of the US-China Clean Energy Research Center, founded in November 2009. The organization conducts joint research and development on clean energy technology by teams of scientists and engineers from both countries.

“The idea was that our two countries would collaborate in the areas of building energy efficiency and clean coal, including carbon capturing and storage and clean vehicles,” Fletcher said.
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China steps up regulation of rare earth industry
Updated: 2011-09-26 23:31
BEIJING – China said Monday it has launched an inter-provincial operation to better regulate the production of light rare earth metals in its latest effort to rein in illegal rare earth exploration.

The local governments of three regions where most of China’s light rare earth metals exist will jointly crack down on the illegal exploration and production of light rare earths, the Ministry of Land and Resources said in a statement on its website.

The operation aims to “promote the protection and rational development of the country’s rare earth resources and further regulate their production,” said the ministry.

—-The governments will also cooperate to better plan the development of rare earths and explore the establishment of strategic reserves of rare earth resources and rare earth trade centers, it said.

—-The country has suspended the issuance of new licenses for rare earth prospecting and mining, imposed production caps and export quotas, and announced tougher environmental standards for rare earth production in order to control environmental damage and protect the resources.

Despite government control, illegal production remains active, seeking profits from surging rare earth prices.
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China Daily was established in June 1981 and has the widest print circulation (over 500,000 per issue, of which a third is abroad) of any English-language newspaper in the country.

Published Monday to Saturday  it is regarded as the English-language “window into China” and is often used as a guide to official policies. It claims to serve an increasing number of foreigners in China, as well as Chinese who wish to improve their English.

I think that official China is definitely sending a signal.  My take, “get a move on and bring on-stream non Chinese REE supply. We’re going to need it too”.  The immediate impact will come from stopping “the illegal exploration and production of light rare earths”. To the extent that these were being consumed within China, that demand source will now compete for the legal production possibly impacting on the amount made available for export, depending on how effective the crackdown is and how much illegal production there actually was.  The long term impact comes as China increasingly tries to bring its mining and production methods up to western standards. There will simply be less supply available and produced at a higher cost. Long term good news for our non Chinese potential suppliers.