China to soon lift restrictions on rare earth exports
China, the top producer and consumer of rare earths, is keeping its export taxes on rare earths, tungsten and molybdenum in place for at least the first quarter of next year, the country’s new tariff plan released this month reveals.
Beijing, which lost in August an appeal to the World Trade Organization against an earlier ruling asking the nation to lift export quotas, was expected to remove or at least ease taxes on the coveted elements. However, there has been no official announcement from the Chinese government indicating that the country will scrap rare earth export restrictions next year, Investorintel analyst, Hongpo Shen, notes:
The Ministry of Commerce (MOFCOM) currently has not yet to announce the requirements and procedures for applying for the export of rare earths in 2015, therefore the policy of export quotas for rare earths in the coming year still uncertain. Nonetheless, China actually has removed the quotas system for the molybdenum and tungsten instead of an export licensing control system, according to a statement posted on the MOFCOM website last month. So what is Beijing likely to do about next year’s export quotas for rare earths? It’s most possible that the same to the export of molybdenum and tungsten, China will lift the export quotas for rare earths while implementing the licensing control system as a tool to enhance rare earths export limitation, particularly to restrict the rare earth export from those illegal producers, I think.
Export taxes on rare earths products have been raised and widened on several occasions and are now levied at 15% – 25% by China’s General Administration of Customs.
Scrapping these taxes could affect non-Chinese producers by potentially reducing FOB rare earth prices, and bring it in line with domestic Chinese prices.
The impact, at least in the short term, could be significant as domestic prices were on average 36% below reported FOB prices this year, according to David Merriman, senior analyst at Roskill Information Service, a metals and minerals consultancy.
However, he added in an August report, both FOB and Chinese domestic prices are expected to increase based on new tighter control of production and increasing costs.
Even before the initial WTO ruling Beijing’s strategy has been shifting from export to production control.
Forced consolidation and vertical integration of the Chinese industry, a policy introduced by the equivalent of China’s cabinet in January, should reduce competition and make output control easier analysts agree.
Image from archives.