The volume of rare earth minerals legally exported from China for the first half of 2012 plunged by 42.7% year-on-year to hit 4,908 tonnes according to statistics from China's customs authorities.
According to the US edition of the China Daily, widespread smuggling and soft demand are the key reasons for this precipitous decline.
If the low export levels persist in the second half of the year, China's total rare earth exports for 2012 could be less than 10,000 tonne,falling far short of the Ministry of Commerce quota of 31,130 tonnes.
According to industry experts small companies are smuggling large amounts of rare earths out of the country in violation of established regulations and quotas, with a white paper issued by China's State Council last month asserting that the actual export volume in 2011 was 2.2 times greater than the official amount.
Rare earths have been a continual source of difficulty and complication for China of late, with recent crackdowns on illegal mining in Guangdong province, and a flaring of trade tensions between China and other major economies over its export curbs.
China currently supplies 90% of the world's rare earths, a group of 17 elements which serve as key ingredients in the defense, renewable energy and electronics sectors.