End of China’s Rare Earth Quota Policy a Boon to India

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The New Year has brought some cheer to India in the supply of rare earths.

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Even as an embittered India last week complained that its neighbor, red China, was not supplying it with the crucial RE – 12 elements that are important to the production of everything from smart phones to missiles, including basic metals such as tungsten – came the news that China decided to end its decade-old quota restrictions on rare earth exports such as tungsten and molybdenum.

The details were mentioned in the recently issued Ministry of Commerce trade guidelines. Under them, rare earths will still require an export license but the amount that can be sold abroad will no longer be regulated by a quota.

No, China’s change of heart was not overnight but after a ruling by the World Trade Organization Dispute Settlement Body  which termed such restrictions as a “breach of the WTO rules.” What the WTO had established was that China’s export quotas were meant to achieve industrial goals rather than conservation.

Mid-2014, China had then lost an appeal at the WTO in a case brought against it by the US, the European Union and Japan.

As most of us know by now, China is the world’s largest producer of rare earths.

What China is essentially saying by retracting its policy is that it had no choice but to abide by WTO rules since it is a member of the organization, too.

While global analysts study the implications of this decision, most are unanimous that in the interim 10 years, many countries had managed to find other sources for rare earths. Japan, for example, decided to forge an alliance with India along with other nations. Under the agreement Japan would import about 4,100 tons of the elements annually  from India.

With nations like Japan making alternate arrangements, over the years, China’s share of world’s production of rare earths had dropped to about 90%.

The author, Sohrab Darabshaw, contributes an Indian perspective on industrial metals markets to MetalMiner.

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