AFP Photo
Baotou, China:
The Chinese government abruptly ended on Thursday its unannounced embargo of exports of crucial strategic minerals to the United States, Europe and Japan, although shipments to Japan still encountered some difficulties, four rare earth industry officials said.
After blocking shipments of raw rare earth minerals to Japan since Sept. 21, and to the United States and Europe since Oct. 18, Chinese customs officials, without explanation, allowed shipments to resume to all three destinations, said industry officials who insisted on anonymity because of the diplomatic sensitivity of the issue. Resumed shipments to Japan still face additional scrutiny and some delays.
The decision came a day and a half after Secretary of State Hillary Rodham Clinton announced plans to visit China on Saturday. She met on Wednesday in Honolulu with Japan's foreign minister, Seiji Maehara, and said afterward that the suspension of shipments had been a "wake-up call" and that both countries would have to find alternative suppliers.
Ms Clinton said at a news conference in Honolulu that she would raise the issue of the suspension at a meeting Saturday on China's Hainan Island, a resort island east of Vietnam, with Beijing's state councilor for foreign policy, Dai Bingguo. China produces 95 percent of the world's rare earths, essential for a wide range of high-tech industries.
Because China is on the opposite side of the international dateline from Honolulu, it was already midday on Thursday in China by the time Ms. Clinton spoke and rare earth shipments had resumed. Chinese customs officials allowed rare earth shipments to proceed starting Thursday morning China time, industry officials said.
Officials in two departments of China's General Administration Customs in Beijing declined to comment on Thursday evening regarding the status of rare earth exports. The commerce ministry, which handles trade policy, also had no immediate comment.
Senior commerce ministry officials have insisted repeatedly that they have not issued any regulations halting shipments. They have suggested at various times that the halt represented either a spontaneous and simultaneous decision by the country's 32 rare earth exporters not to make shipments because of a deterioration in Sino-Japanese relations or a greater thoroughness on the part of customs inspectors.
Even with customs officials allowing containers of rare earths to leave China's docks, foreign buyers face a separate, serious problem. China has repeatedly reduced its export quotas for rare earths over the last five years so that they are now well below world demand.
No more than a few thousand metric tons remain to be shipped under this year's quota, out of 30,300 metric tons of authorized shipments. World demand for Chinese rare earths approaches 50,000 tons a year, according to industry estimates.
The value of the remaining quotas has soared to the point that the right to export a single ton of rare earths from China now sells for about $40,000, including special Chinese taxes.
That is a sizable additional cost for buyers of neodymium, a rare earth used to make lightweight, powerful magnets essential to everything from large wind turbines to gasoline-electric cars to Apple iPhones. Neodymium currently sells for about $40,000 a metric ton in China, and twice that much outside of the country because of the export restrictions, according to data from Metal Pages, a database service in London.
The cost of quotas has become exorbitant for users of lanthanum, which is vital for the catalytic converters that clean the tailpipe pollution of conventional, gasoline-powered cars. Lanthanum, mostly produced here in Baotou, sells for less than $5,000 a ton in China and up to 10 times outside of China because of the export restrictions.
This has created a big incentive for companies to move factories to China, and many already have.
China's interruption in exports has caused much more distress in Japan than in the United States or Europe, and not just because Japan's shipments were cut off much earlier.
China only requires export quotas for shipments in which the material has a rare earth content of about 50 percent or more. High-tech materials made from rare earths, like special magnetic powders for the clean energy and electronics industries or polishing powders for the glass industry, are not subject to quotas and are inexpensively available.
The United States and Europe already buy mostly highly processed powders from China, so the expansion of the customs policy of blocking shipments of raw rare earths had a limited, mostly symbolic effect.
The Chinese government broadened its halt in raw rare earths to include the United States and Europe on Monday of last week, the morning after Zhang Guobao, the country's top energy official, called in foreign reporters in Beijing to deliver a blistering denunciation of the Obama administration's decision to begin investigating whether China's clean energy policies violate the World Trade Organization's free trade rules.
By contrast, Japan is the biggest importer of raw rare earths and tends to process them into industrial materials.
Baotou, a smoggy mining and steel city in China's Inner Mongolia, is the capital of China's rare earth industry. The city's rare earth refinery district, which processes ore from a giant mine to the north that has iron ore and rare earths, was bustling early Thursday afternoon.
Huge red trucks rumbled through the streets carrying white vinyl sacks each the size of a compact car, stuffed with rare earths. The acrid, gray air had a sharp, metallic tang.
Two workers on a dusty road outside one refinery said that their plant was running 24 hours a day. They added that they were only working eight-hour shifts themselves, with their employer complying with China's tightening labor laws.
For China, the halt in rare earth shipments seems to have provided clear, geopolitical benefits. For starters, just three days after the shipments stopped, the Japanese government relented in a dispute over a Chinese fishing trawler that collided with two Japanese patrol boats 40 minutes apart near disputed islands, and released the trawler's captain.
Despite growing angst in Japanese industry, the Japanese government has been low-key and polite in asking for a resumption of shipments, a show of respect that China has long appreciated in diplomatic relations.
China's willingness to play economic hardball could yet have long-term drawbacks, however, if it prompts multinationals to reduce their reliance on manufacturing in China and spread their investments among more countries.
For Japan, the cutoff of raw rare earths has been a bruising reminder of its dearth of natural resources, and a sad reminder of the country's vulnerability. Some historians have suggested that Japan attacked Pearl Harbor in 1941 partly because the United States had imposed an embargo on oil exports in response to Japanese military expansionism, notably in China.
After blocking shipments of raw rare earth minerals to Japan since Sept. 21, and to the United States and Europe since Oct. 18, Chinese customs officials, without explanation, allowed shipments to resume to all three destinations, said industry officials who insisted on anonymity because of the diplomatic sensitivity of the issue. Resumed shipments to Japan still face additional scrutiny and some delays.
The decision came a day and a half after Secretary of State Hillary Rodham Clinton announced plans to visit China on Saturday. She met on Wednesday in Honolulu with Japan's foreign minister, Seiji Maehara, and said afterward that the suspension of shipments had been a "wake-up call" and that both countries would have to find alternative suppliers.
Ms Clinton said at a news conference in Honolulu that she would raise the issue of the suspension at a meeting Saturday on China's Hainan Island, a resort island east of Vietnam, with Beijing's state councilor for foreign policy, Dai Bingguo. China produces 95 percent of the world's rare earths, essential for a wide range of high-tech industries.
Because China is on the opposite side of the international dateline from Honolulu, it was already midday on Thursday in China by the time Ms. Clinton spoke and rare earth shipments had resumed. Chinese customs officials allowed rare earth shipments to proceed starting Thursday morning China time, industry officials said.
Officials in two departments of China's General Administration Customs in Beijing declined to comment on Thursday evening regarding the status of rare earth exports. The commerce ministry, which handles trade policy, also had no immediate comment.
Senior commerce ministry officials have insisted repeatedly that they have not issued any regulations halting shipments. They have suggested at various times that the halt represented either a spontaneous and simultaneous decision by the country's 32 rare earth exporters not to make shipments because of a deterioration in Sino-Japanese relations or a greater thoroughness on the part of customs inspectors.
Even with customs officials allowing containers of rare earths to leave China's docks, foreign buyers face a separate, serious problem. China has repeatedly reduced its export quotas for rare earths over the last five years so that they are now well below world demand.
No more than a few thousand metric tons remain to be shipped under this year's quota, out of 30,300 metric tons of authorized shipments. World demand for Chinese rare earths approaches 50,000 tons a year, according to industry estimates.
The value of the remaining quotas has soared to the point that the right to export a single ton of rare earths from China now sells for about $40,000, including special Chinese taxes.
That is a sizable additional cost for buyers of neodymium, a rare earth used to make lightweight, powerful magnets essential to everything from large wind turbines to gasoline-electric cars to Apple iPhones. Neodymium currently sells for about $40,000 a metric ton in China, and twice that much outside of the country because of the export restrictions, according to data from Metal Pages, a database service in London.
The cost of quotas has become exorbitant for users of lanthanum, which is vital for the catalytic converters that clean the tailpipe pollution of conventional, gasoline-powered cars. Lanthanum, mostly produced here in Baotou, sells for less than $5,000 a ton in China and up to 10 times outside of China because of the export restrictions.
This has created a big incentive for companies to move factories to China, and many already have.
China's interruption in exports has caused much more distress in Japan than in the United States or Europe, and not just because Japan's shipments were cut off much earlier.
China only requires export quotas for shipments in which the material has a rare earth content of about 50 percent or more. High-tech materials made from rare earths, like special magnetic powders for the clean energy and electronics industries or polishing powders for the glass industry, are not subject to quotas and are inexpensively available.
The United States and Europe already buy mostly highly processed powders from China, so the expansion of the customs policy of blocking shipments of raw rare earths had a limited, mostly symbolic effect.
The Chinese government broadened its halt in raw rare earths to include the United States and Europe on Monday of last week, the morning after Zhang Guobao, the country's top energy official, called in foreign reporters in Beijing to deliver a blistering denunciation of the Obama administration's decision to begin investigating whether China's clean energy policies violate the World Trade Organization's free trade rules.
By contrast, Japan is the biggest importer of raw rare earths and tends to process them into industrial materials.
Baotou, a smoggy mining and steel city in China's Inner Mongolia, is the capital of China's rare earth industry. The city's rare earth refinery district, which processes ore from a giant mine to the north that has iron ore and rare earths, was bustling early Thursday afternoon.
Huge red trucks rumbled through the streets carrying white vinyl sacks each the size of a compact car, stuffed with rare earths. The acrid, gray air had a sharp, metallic tang.
Two workers on a dusty road outside one refinery said that their plant was running 24 hours a day. They added that they were only working eight-hour shifts themselves, with their employer complying with China's tightening labor laws.
For China, the halt in rare earth shipments seems to have provided clear, geopolitical benefits. For starters, just three days after the shipments stopped, the Japanese government relented in a dispute over a Chinese fishing trawler that collided with two Japanese patrol boats 40 minutes apart near disputed islands, and released the trawler's captain.
Despite growing angst in Japanese industry, the Japanese government has been low-key and polite in asking for a resumption of shipments, a show of respect that China has long appreciated in diplomatic relations.
China's willingness to play economic hardball could yet have long-term drawbacks, however, if it prompts multinationals to reduce their reliance on manufacturing in China and spread their investments among more countries.
For Japan, the cutoff of raw rare earths has been a bruising reminder of its dearth of natural resources, and a sad reminder of the country's vulnerability. Some historians have suggested that Japan attacked Pearl Harbor in 1941 partly because the United States had imposed an embargo on oil exports in response to Japanese military expansionism, notably in China.
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