Abstract Recently, the World Trade Organization (WTO) Dispute Settlement Body's Expert Panel issued an interim report ruling that the United States, Japan, and the European Union must comply with China’s demands regarding its rare earth export restriction policies. This decision could force China to revise its current rare earth export quota system and tariffs, marking a significant shift in its regulatory approach.
Following the release of the report, several media outlets reported that China is preparing a series of new measures to adapt to the evolving industry landscape. These include stricter controls on private mining operations, the introduction of the "Regulations on the Management of Rare Metals," and differentiated management strategies for different types of rare earth elements.
Industry experts, however, emphasize that while these moves may appear as strategic responses, they require more thorough preparation from the government and a balanced perspective from the industry.
WTO Litigation Pressure
For years, the Chinese rare earth sector has faced challenges such as unregulated mining, environmental degradation, and low-cost exports. Despite these issues, the U.S., EU, and Japan have repeatedly criticized China’s policies without addressing the ecological concerns.
Since 2009, when the EU first called for the removal of China’s rare earth export quotas, various countries have sought ways to access China’s rare earth resources at lower costs.
Wei Qining, a researcher at China Investment Consulting, predicts that China will face increasing pressure from external forces. He warns that lifting the export quota and tariff system might lead to a resurgence of past problems, including smuggling and illegal trade.
Wang Qinhua, vice president of the China Nonferrous Metals and Rare Earth Industry Associations, stated that the WTO case involving rare earths is nearing its conclusion, and the removal of export quotas will likely be discussed afterward. He added that the process will begin with light rare earths.
The gradual liberalization of light rare earth exports may help prevent the outflow of heavy rare earths. While light rare earths are found in several countries like the U.S., Russia, and Australia, over 70% of the world’s heavy rare earths are located in southern China. Heavy rare earths play a crucial role in high-tech industries, offering lighter and higher-quality electronic components. Some rare earth elements, like lanthanum, can only be mined for about 30 years.
Industry Consolidation Shows Results
The WTO ruling is expected to bring major changes to the rare earth export environment in 2014. The Chinese government has limited time to respond, which has accelerated the deepening of industry governance reforms. The ongoing industry rectification and the new policies being developed are all part of the preparations for the WTO case.
According to Zhang Beibei, a rare earth analyst, after the rectification, illegal exports have decreased, and irregular trading has also declined. Some companies now only sell rare earths with special invoices. Orders for rare earths increased in July and August, signaling a potential market recovery.
Recent announcements about Baosteel’s rare earth listing prices and purchases have raised expectations among market participants. Zhang Beibei noted that some merchants have already started raising prices for certain oxides, such as cerium oxide. A price increase is expected in November, but the extent and duration will depend on whether the national purchase and storage policies are implemented and whether other supportive measures are introduced.
Zhang Beibei said: “The state has improved resource exploitation and management through macroeconomic regulation. Regardless of the situation, there is a bottom line for export prices.â€
A representative from the China Rare Earth Society mentioned that no special policies are being introduced for large state-owned enterprises. Instead, several regulations have raised entry barriers for rare earth firms, aiming to combat illegal activities, optimize the industrial structure, and promote high-tech development.
Rational Approach Is Needed
Regarding the recent price rebound, industry insiders believe it is a short-term trend influenced by multiple factors, including supply and demand, domestic and international mining, and market speculation. They stress the need for a rational approach.
Zhang Beibei added that only a price increase supported by real demand reflects a true market condition. Over the past two years, rare earth prices have been declining due to weak demand.
“Some rare earth companies report fewer orders and lower profits. Both upstream and downstream enterprises face challenges in pricing, production costs, and risk management,†he said. The main issue today is weak terminal consumption, which is closely tied to the broader economic environment.
According to industry sources, many downstream companies collapsed after rare earth prices spiked in 2011. Currently, global demand remains sluggish. Although industry rectification has had some positive effects, the black market still exists. “The key is to ensure that both upstream and downstream sectors develop together. The government should encourage targeted technological innovation. This is a long-term process.â€
Following the release of the report, several media outlets reported that China is preparing a series of new measures to adapt to the evolving industry landscape. These include stricter controls on private mining operations, the introduction of the "Regulations on the Management of Rare Metals," and differentiated management strategies for different types of rare earth elements.
Industry experts, however, emphasize that while these moves may appear as strategic responses, they require more thorough preparation from the government and a balanced perspective from the industry.
WTO Litigation Pressure
For years, the Chinese rare earth sector has faced challenges such as unregulated mining, environmental degradation, and low-cost exports. Despite these issues, the U.S., EU, and Japan have repeatedly criticized China’s policies without addressing the ecological concerns.
Since 2009, when the EU first called for the removal of China’s rare earth export quotas, various countries have sought ways to access China’s rare earth resources at lower costs.
Wei Qining, a researcher at China Investment Consulting, predicts that China will face increasing pressure from external forces. He warns that lifting the export quota and tariff system might lead to a resurgence of past problems, including smuggling and illegal trade.
Wang Qinhua, vice president of the China Nonferrous Metals and Rare Earth Industry Associations, stated that the WTO case involving rare earths is nearing its conclusion, and the removal of export quotas will likely be discussed afterward. He added that the process will begin with light rare earths.
The gradual liberalization of light rare earth exports may help prevent the outflow of heavy rare earths. While light rare earths are found in several countries like the U.S., Russia, and Australia, over 70% of the world’s heavy rare earths are located in southern China. Heavy rare earths play a crucial role in high-tech industries, offering lighter and higher-quality electronic components. Some rare earth elements, like lanthanum, can only be mined for about 30 years.
Industry Consolidation Shows Results
The WTO ruling is expected to bring major changes to the rare earth export environment in 2014. The Chinese government has limited time to respond, which has accelerated the deepening of industry governance reforms. The ongoing industry rectification and the new policies being developed are all part of the preparations for the WTO case.
According to Zhang Beibei, a rare earth analyst, after the rectification, illegal exports have decreased, and irregular trading has also declined. Some companies now only sell rare earths with special invoices. Orders for rare earths increased in July and August, signaling a potential market recovery.
Recent announcements about Baosteel’s rare earth listing prices and purchases have raised expectations among market participants. Zhang Beibei noted that some merchants have already started raising prices for certain oxides, such as cerium oxide. A price increase is expected in November, but the extent and duration will depend on whether the national purchase and storage policies are implemented and whether other supportive measures are introduced.
Zhang Beibei said: “The state has improved resource exploitation and management through macroeconomic regulation. Regardless of the situation, there is a bottom line for export prices.â€
A representative from the China Rare Earth Society mentioned that no special policies are being introduced for large state-owned enterprises. Instead, several regulations have raised entry barriers for rare earth firms, aiming to combat illegal activities, optimize the industrial structure, and promote high-tech development.
Rational Approach Is Needed
Regarding the recent price rebound, industry insiders believe it is a short-term trend influenced by multiple factors, including supply and demand, domestic and international mining, and market speculation. They stress the need for a rational approach.
Zhang Beibei added that only a price increase supported by real demand reflects a true market condition. Over the past two years, rare earth prices have been declining due to weak demand.
“Some rare earth companies report fewer orders and lower profits. Both upstream and downstream enterprises face challenges in pricing, production costs, and risk management,†he said. The main issue today is weak terminal consumption, which is closely tied to the broader economic environment.
According to industry sources, many downstream companies collapsed after rare earth prices spiked in 2011. Currently, global demand remains sluggish. Although industry rectification has had some positive effects, the black market still exists. “The key is to ensure that both upstream and downstream sectors develop together. The government should encourage targeted technological innovation. This is a long-term process.â€
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