Chinese government rolls up independent miners in rare earth industry group

In a move to curb the rampant domestic illegal mining of rare earth, as well as regulate its rare earths players, China is launching an industry association for the precious metal commodity on April 8.

According to The China Post, the long-awaited industry group will have more than 100 members, which essentially includes most rare earths players in China.

Only last week, the Ministry of Industry and Information Technology (MIIT) expressed plans of merging Beijing's rare earths mining players into two or three giant companies. The announcement, however, faced severe critics from experts, such the academic from Jiangxi Polytechnic College, Professor Wu Ding, who claimed the move could be detrimental to China's economic growth in the long term.

"I am not too supportive of consolidating into a few large companies.  State-owned monopolies are another obstacle that hinders China's economic development.  The amount of space state enterprises squeeze smaller enterprises into is too small.  You can see this in oil, electricity, and so on," Wu's was quoted as saying over New Tang Dynasty Television by International Business Times. “In Inner Mongolia, where most of China's rare earths are found, 14 rare earth mining companies have been consolidated under Baotou Steel Rare-Earth Hi-Tech Company,” Wu added.

In an article for Technology Metals Research, rare earths consultant Jack Lifton said, "This announcement is really about the heavy rare earth elements extracted today from the so-called ionic-clay deposits in south China, by the method of heap leaching."

"The Chinese are clearly worried about their domestic security of supply of the have rare earths," Lifton advised. "They are, as the official article…states, going to be proactive in solving that problem. These movements by the Chinese were set in motion long before anyone in the U.S. government finally learned how to spell WTO. The Chinese will not be deterred from their long-term goal," Lifton concluded.

China dominates the world’s rare earths production, accounting for more than 95% of global supply – a situation that has often generated protests from foreign manufacturers who rely on Chinese rare earths.

Three weeks ago, the U.S., Japan and the European Union filed an official complaint at the World Trade Organization, urging the body to take actions against China’s restrictions on these metals,  a key input for everything from iPhones to hybrid cars.

In 2011, Beijing imposed an export quota of 30,184 metric tonnes, marginally reduced from 30,258 metric tonnes in 2010. For 2012, based on analyst calculations, the country’s full-year quota may hit approximately 31,130 metric tonnes.

China underlined that it feels that export restrictions are necessary in order to maintain domestic demand and protect the environment. The WTO responded by stating that it considers the argument illegitimate and that China has been “unable to demonstrate” the benefits of its policies on the environment. At present the ruling does not include rare earth metals, however analysts are hoping to see China alter some of its rare earth policies as a result of the ruling moving forward.

Last year, in the midst of China’s crackdown on illegal rare earths mines, prices for rare earths went up by as much as ten times their value from 2011, before beginning to gradually come down again.