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Beijing accepts defeat in WTO case and lifts export quota, but will now focus on rare earth export licences and taxes.
China has lifted export quotas on rare earth elements after admitting defeat in a World Trade Organization (WTO) case.
The country, which supplies 85% of the world’s rare earths, has lifted a long standing quota which capped tonnages of exports.
The WTO complaint, initially raised in 2012 by the US and saw the EU, Japan and Canada join soon after, claimed that China was deliberately conducting unfair business practices by restricting the irreplaceable elements to its rest of the world competitors.
The major focus was the export quota China imposed on rare earth concentrates which capped quantities from as high as 50,145 tonnes in 2009 to 30,611 tonnes in 2014.
Rare earths restructure, but with the same outcome
Benchmark Mineral Intelligence believes that fundamentally the game will not change and that China’s preferential treatment of domestic producers will continue by other means.
We expect China to refocus its efforts on restructuring the way it issues export licences to its producers and on simplifying its rare earths tax system.
Without a licence companies are banned from exporting. Beijing still controls this vital bottleneck of the supply chain, therefore whether it caps exports at the port or controls the number of export licences issued, the result is the same: restricted supply of rare earths to the rest of the world.
China has achieved this in many other critical mineral industries and while rare earths is the most extreme of all, the principal is no different in the eyes of the country’s governing bodies.
A major talking point is whether western joint-venture (JV) companies be allocated exported licences.
The move also offers up a chance for China to simplify its rare earths tax. It will be of great interest to the industry to see what the new taxation will look like and whether it will be different for 100% Chinese owned operations and international JVs.
All of these factors will create short-term uncertainty as the industry will wait to see how it plays out.
In the long term China’s stance of redirection of rare earths towards domestic consumption is likely to remain the same and consistent with its plan to create an economy based on value-added products and not raw materials.
Simon Moores
