Why Western countries press China to export rare earth

Production of rare earth result in the huge environmental destruction

At the request of the European Union (EU), the United States and Japan, the World Trade Organization (WTO) organized a special group on July 23, investigating, discussing and settling about China's export control measures on rare earth elements, tungsten and molybdenum.

In March, the E.U., the United States and Japan resorted China's export restriction policies on tungsten, molybdenum and 17 rare earth elements to the WTO. On June 27, they again demanded the WTO to launch the dispute settlement mechanism and set up special group so as to solve the dispute on China's controlling exports of rare earth elements and some other metallic elements.

What is their intention to deliberately provoke rare earth dispute?

China possesses less than 50 percent of total rare earth reserves in the world but it provided the world with 90 percent of rare earth output in 2001 and 97 percent in 2010.

However, so large world market share did not bring monopoly profits to China and the global rare earth had been maintaining at a super low price by 2005. Supported by local governments of all levels, the large, medium and small enterprises poured in rare earth industry and began excessive competition. Driven by short-term profits, plenty of small enterprises predatorily exploited rare earth elements, bringing the productivity of the whole rare earth industry down. The recovery ratio of rare earth exploited by state-owned enterprises only reaches to 60 percent per ton, that of large private enterprises is 40 percent and that of illegal enterprises is only 5 percent. The rare earth resource was squandered a lot, thus causing severe environmental problem.

In order to protect environment and the rare earth resource, Chinese government tried to control the predatory production and exportations of the rare earth resource. The export quota has been reduced to about 30,000 tons from original 65,000 tons from 2005 to 2010, which greatly decreased overexploitation of rare earth resource.

If anything, China has exported too much rather than too little rare earths. Related countries should resume their own production of rare earths, instead of forcing China to increase exports of the valuable resources. It is extremely selfish of Western countries to force China to increase rare earth exports and expect to continue buying the resources at unreasonably low prices, without the regard for the severe environmental damage China has suffered.

Of course, China could say “no” to unreasonable requests from Western countries, but Western-led international trade rules would place it under heavy pressure. China must seriously reflect on why it has sold rare earths at unreasonably low prices, and now even face groundless accusations by Western countries after paying a high environmental price.

The United States has implemented high-technology exports restriction to China for long time. During the Cold War, it initiated the Coordinating Committee for Multilateral Export Controls (CoCom) to put an arms embargo on socialist countries like China. After the Korean War broke out, a “China sub-committee” of the CoCom was established to impose stricter embargo on China than on the Soviet Union and Eastern European countries. Especially the forbade shipment of 207 items beyond the CoCom list were also forbade to China. After the end of the Cold War, the United States played a leading role in replacing the CoCom with the seemingly less strict Wassenaar Arrangement, which is in essence aimed at restricting exports to China.

Despite several reforms in recent years, the United States has retained a relatively strict export control policy toward China. In 2007, the U.S. Department of Commerce published the “Revisions and Clarification of Export and Reexport Controls for the People’s Republic of China (PRC); New Authorization Validated End-User; Revision of Import Certificate and PRC End-User Statement Requirements,” stating that nine items such as aircraft and aircraft engines, avionics, navigation systems, and communications equipment “have the potential to contribute to” China’s military buildup, and are thus not allowed to be exported to China. The U.S. export controls seem to only target items concerning national security such as military and aerospace products, but the ambiguous criteria as well as complicated examination and approval procedures actually constitute a serious obstacle to China’s high-tech imports.

UN, DR Congo helicopter gunships attack rebels

The United Nations and Democratic Republic of Congo army used helicopter gunships on Thursday to attack army mutineers thought to be threatening the main eastern city of Goma.

Three helicopters from the UN country mission and two from the DRC army (FARDC) were seen around the villages of Nkokwe and Bukima, where the so-called M23 rebels are thought to have positions.

The UN and the Congolese army sent MI24 and MI25 helicopters flown by Ukrainian pilots. The gunships, first made by the Soviet Union, strafed hillsides with 30mm rounds and fired rockets, a UN source said.

"We made several passes on rebel positions," the UN official said.

The UN and the troops from the Democratic Republic of Congo, which claims the rebels are a Rwandan proxy, had earlier deployed tanks around Goma in Nord-Kivu province.

However, the rebels said they had no plans to seize the regional capital and only wanted to negotiate with the government in Kinshasa.

"The FARDC are currently attacking our positions, but they don't know where we are. There's no problem," a colonel from the rebels said.

The M23 rebels — named after a failed 2009 peace deal signed on March 23 — are led by Bosco Ntaganda, nicknamed the "Terminator", who is wanted by the International Criminal Court for recruiting child soldiers a decade ago.

His co-accused and former boss Thomas Lubanga was sentenced to 14 years in jail on Tuesday.

The mutineers are ex-rebels who were integrated into the regular army in 2009 as part of a deal that followed their failed 2008 offensive on Goma, under the command of Tutsi leader Laurent Nkunda.

They defected in April, ostensibly over pay, but experts argue Ntaganda and his men are flexing military muscle to clinch further rights over the area's lucrative mines.

In Thursday's gunship attacks, a group of women working in fields near Bukima claimed they were caught in the crossfire.

"We were hiding in the banana groves when the helicopters opened fire. There was one person with us who was hit and died immediately," said one woman who asked not to be named.

Nkokwe and Bukima are on the western border of the Virunga national park, some 50km from Goma and home to critically endangered mountain gorillas and the location of two active volcanoes.

The M23 mutineers had launched an offensive in recent days, easily overwhelming the FARDC. Around 600 regular troops and tens of thousands of civilians were forced to seek refuge in Uganda.

"Our mission is not to go to Goma. We are strong but we are also disciplined," M23 spokesman Vianney Kazarama said.

The mutineers had seized a number of towns along the Ugandan border and promptly withdrew from all but Bunagana.

"We have pulled out of those towns, our mission is not to control them. What we want is that the Congolese government sit down at the negotiating table," Kazarama said.

Almost uninterrupted conflict over DR Congo's vast mineral resources — which include gold, diamonds, coltan, tin, tungsten and many others — has left at least two million people dead since 1999, say rights groups.

A diplomat in Kinshasa said an M23 offensive on Goma appeared unlikely.

Direct Line in play as buyout shops circle

Blackstone Group LP (BX.N) and Bain Capital LLC are working on a possible joint offer for Direct Line, a person directly familiar with the plans said on Sunday. Blackstone declined to comment while Bain did not respond to a request for comment.
Another group, comprising KKR & Co LP, Apax Partners LP and BC Partners Ltd, is putting together a rival offer, the Sunday Times reported earlier, quoting city sources as saying both groups were planning to make moves at the end of the month.
KKR, Apax, BC Partners and RBS did not respond to a request for comment.
European regulators have ordered RBS to sell or float Direct Line by the end of 2013 to counterbalance the competitive advantage it received from a British government bailout, which left it 82 percent state-owned.
The buyout interest is boon for RBS, which is in the process of rebuilding its balance sheet and has said it wants to list Direct Line in the fourth quarter. Analysts have estimated it could be valued at around 3 billion pounds ($4.66 billion).
Tungsten, the British buyout vehicle co-founded by financier Edmund Truell, had said in May it could bid for Direct Line but Truell said earlier this month that he was not close to any deal to buy RBS's insurance unit.
On Friday, sources told Reuters RBS had added eight banks to help with Direct Line's IPO. The public offering of a minority stake is being run by Goldman Sachs, Morgan Stanley and UBS, who are acting as joint book runners.
Founded in 1985, Direct Line also trades under the Churchill and Privilege brands and owns the Green Flag breakdown recovery service.
RBS needed a 45 billion pound bailout in 2008 at the height of the financial crisis as its acquisition of Dutch bank ABN AMRO in 2007 pushed it close to collapse.
RBS' lengthy turnaround process has made the timetable for any sale of Britain's stake in the troubled bank uncertain, prompting some speculation that the government may consider selling some of the stake at a loss at first.

China Tungsten Industry Report

The wide application of touch screen technology in such electronics as smart phones and tablet PCs boosts the demand for tungsten, and the exploitation of tungsten is circumscribed in many countries, as a result,there is acute conflict between tungsten supply and demand, the prices of tungsten products kept rising in 2010-2011 and still remained high in Q1 2012 though fell slightly.

China, the country with the richest tungsten resources in the world, holds 65% of the global tungsten ore reserves and accounts for around 85% of the global tungsten ore supply. In 2011, China's output of tungsten ore concentrates (WO3 65%) hit all-time record high of 135,700 tons, up 4.60% over 2010. Restricted by the limited new exploited resources and the policies concerning total exploration amount control and export quotas, China's output of tungsten ores will witness little scope for growth in the coming years and the global tungsten market will present tight supply.

In 2011, Jiangxi Province remained as the largest producer of tungsten ore concentrates in China with an output of 65,830 tons, accounting for 48.5% of national exploration amount, followed by Hunan Province with an output of 31,150 tons, which could be mainly attributed to their abundant tungsten ore resources together making up more than 50% of total tungsten ore reserves in China.

Jiangxi-based Chongyi Zhangyuan Tungsten Co., Ltd., Jiangxi Tungsten Industry Group Co., Ltd., Jiangxi Rare Earth and Rare Metals Tungsten Group Corporation and Jiangxi Xiushui Xianglushan Tungsten Co., Ltd., and Hunan-based Hunan Nonferrous Metals Holding Group Co., Ltd. and Hunan Chenzhou Mining Group Co., Ltd. are the major tungsten production and processing enterprises in China and have relatively complete industrial chain. In 2011, benefiting from the rising prices of tungsten products, these enterprises delivered robust performance. Meanwhile, the desire for profit and the constraints on tungsten ore resources have urged them to expand downwards the industry chain.

For instance, Chongyi Zhangyuan Tungsten began to carry out the technological transformation project of high-performance and high-precision coated tips since August 2011. The Phase I will complete installation and debugging in H2 2012 and start preliminary production in Q4 2012. It is estimated that the project will provide the company with 100 tons of cemented carbide tool capacity and RMB280 million of revenue upon full completion in 2014.

Xianglushan Tungsten possessed 10,000 tons of APT production capacity and added one tungsten oxide production line in 2011 and will establish workshop for cemented carbide micro-drills in 2012.

Hunan Nonferrous Metals has strengthened the R & D of cemented carbide products and invested in the technological transformation projects of high-performance ultra-fine grain cemented carbide production line and of special shaped cemented carbide & deep processing line to increase its market share in Chinese cemented carbide field.

It is in the report that covers the followings:

• The reserves and distribution of global tungsten resources, and the supply & demand of global tungsten industry;
• The reserves and distribution of Chinese tungsten resources, and the supply & demand of Chinese tungsten industry;
• Annual indexes of China's total tungsten exploration amount control and export quotas, and indexes allocated to enterprises and regions;
• Competition pattern of Chinese tungsten industry;
• The price changes of global and Chinese tungsten products;
• Import and export of major tungsten products in China;
• Operation of major tungsten production and processing enterprises in China, such as revenue and profit, capacity and output of tungsten ores, main mining resource and production enterprises and their tungsten product business development, etc.

S.Korea's rare earth imports from China surge

South Korea's rare earth imports from China surged last month due to a fall in import prices, customs data showed Tuesday.

South Korea purchased a total of 126 tons of rare earth material from China in June, up 36.3 percent from a month earlier, according to the Korea Customs Service (KCS).

In terms of value, rare earth import from China edged down 0.4 percent on-month to $3.8 million in June, indicating that falling import prices contributed mainly to the June surge in import volume.

Rare earth materials, including scandium and yttrium, are key components for modern-day technologies such as hybrid electric vehicles, liquid crystal display (LCD) and other high-tech products.

Rare earth imports from Japan declined 17.3 percent on-month to 57 tons last month, while import from Germany jumped 80.9 percent to 12 tons over the same period.

Meanwhile, imports of magnesium from China soared 73.3 percent on-month to 903 tons in June, but tungstenimports declined 24.8 percent to 36 tons. Cobalt imports from China expanded 39.2 percent to 436 tons over the cited period.

Bottom Line

• FOREIGN POLICY. DLA Piper is lobbying for the Palestinian Investment Fund regarding “issues related to economic development in the Palestinian territories,” according to lobbying disclosure records. One of the lobbyists on the account, Matthew C. Bernstein, is a partner at the firm.

• BANKING. David L. Horne LLC is lobbying for the Community Mortgage Lenders of America on “affordable housing, mortgage finance and related issues.” David Horne, former chief of staff for the Department of Housing and Urban Development, is the sole lobbyist on the registration.

• MILITARY. American Defense International Inc. is lobbying for TCOM to obtain “meetings with officials about JLENS program,” according to disclosure records. Michael Khatchadurian, the former communications liaison for the chairman of the Joint Chiefs of Staff, is lobbying for the company. 

• NATIVE AMERICAN AFFAIRS. JC Watts Companies is lobbying for the Muskogee Creek Nation regarding “land into trust, Indian health, Indian Housing, Bureau of Indian Affairs programs and funding.” Former Rep. J.C. Watts (R-Okla.) and Steve Pruitt, former director of the House Budget Committee, are on the account.

• MINING. J.A. Green and Co. is lobbying for Global Tungsten & Powders on “issues related to government sales of tungsten.” Jeffrey Green, a former counsel for the House Armed Services Committee, is the lobbyist on the account.

The Podesta Group is lobbying for Uranium One Inc. regarding “international mining projects.” Paul Brathwaite, former executive director of the Congressional Black Caucus, and Stephen Rademaker, former senior counsel and policy director for national security affairs for then-Senate Majority Leader Bill Frist (R-Tenn.), are lobbying for the company.

 • PUBLIC RADIO. Navigators Global LLC is lobbying for National Public Radio on “issues related to the public radio system and National Public Radio.” A slew of former government officials are listed on the account, including Christopher Cox, former special assistant to President George H.W. Bush; and Philmore B. Anderson, former special assistant to former Vice President Dan Quayle.

 • CHARITIES. Patton Boggs LLP is lobbying for the Lance Armstrong Foundation on “issues related to support for the foundation’s activities.”

U.S. Accuses China of Holding up Rare Earths Exports

In a move that has implications for Ohio’s manufacturing industry, U.S. Trade Representative Ron Kirk announced Wednesday that the U. S. has requested the World Trade Organization take up a dispute that China is unfairly restraining its exports on rare earths, tungsten and molybdenum.
The European Union and Japan also have requested panels on this matter today.
“These materials are key inputs in a multitude of U.S. manufacturing sectors and American-made products, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum and chemicals,” Kirk said.  “It is vital that U.S. workers and manufacturers obtain the fair and equal access to raw materials like rare earths that China specifically agreed to when it joined the WTO.”
Earlier this year, the United States won a WTO challenge against China’s export restraints on nine other industrial materials.  Kirk said China argued in that case that its export restraints could be justified as conservation or environmental protection.
Kirk said that China’s export restraint measures on rare earths, tungsten and molybdenum “appear to be part of a troubling industrial policy aimed at providing substantial competitive advantages for Chinese manufacturers at the expense of foreign manufacturers.”
He added that because of China’s position as a leading global producer of these materials, its export restraint measures give China the ability significantly to affect global supply and pricing.  The measures can provide important advantages to China’s downstream producers, to the detriment of their U.S. and other foreign counterparts, Kirk said.