China to start subsidizing rare earth miners as exports fall 18% in just one month

China is responsible for more than 90% of the global supply of rare earths and a few years ago embarked on a crackdown on illegal rare earth mines and consolidation of the industry under a few large producers.

Controversially the country – which is also the number one consumer of rare earths –  also places a cap on exports to put a floor under prices of the 17 elements used in a variety of industries including green technology, defence systems and consumer electronics

The US and Japan took China to the WTO over the restrictions, but in fact according to China Customs figures, exports of rare earths reached only 1,345 tons in October 2012, down 18% from the month before and far below the annual quota of more than 30,000 tonnes.

Production cuts have not achieved much either.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., China's largest rare earths producer, recently asked its subsidiaries to halt production altogether, which gave a temporary boost to always more-in-demand heavy rare earths.

But the value of more abundant light REEs continue to decline with lanthanum and cerium down more than 80% from highs set last year. What's more, when Australia's Lynas which is days away from starting up a processing plant and Molycorp in the US start production, supply would again shoot up.

The situation has become so dire reports AFP that China's finance ministry has now agreed to subsidize miners.

Rare earth miners would receive a subsidy of 1,000 yuan ($160) for every tonne of rare earth oxides they produced, while smelters would get 1,500 yuan ($240) per tonne, China's finance ministry said in a statement.

The ministry would also offer financial support to companies to upgrade production facilities, as well as to fund research and development projects, it said.

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