China halts rare earth production at three mines

(Reuters) - China will halt production of rare earths at three major mines, state media reported on Tuesday, a move which could tighten supply in China, the top exporter of the valuable minerals.

Li Guoqing, the director of the mining management bureau of Ganzhou city in the eastern Jiangxi province, said on Monday that three of eight major rare earth producing counties would stop production by year-end, China's official English-language newspaper said.

It is unknown when production will resume, Li said, according to the China Daily.

Ganzhou produces almost 40 percent of China's ionic rare earths, the newspaper said, minerals used to manufacture high-tech products such as electric batteries, wind turbines and electronics.

China, which produces about 97 percent of the world's supplies of the 17 minerals, has cited resource depletion and environmental degradation concerns as reasons for a nationwide crackdown on its rare earths sector.

It has capped production at 93,800 tonnes and exports at 30,184 tonnes, saying it cannot sustain the sort of output levels demanded by foreign customers.

Demand for rare earths is expected to double in the next five years, but Chinese output growth is likely to be much slower, and major importing countries have toyed with the idea of taking legal action.

China's dominant role in global production has created incentives for miners to flout rules, especially as global demand surges, with illegal production and smuggling still rampant.

The World Trade Organization said in July that Chinese restrictions on raw materials exports -- including a variety of quotas, tariffs, permits and minimum prices -- were illegal.

Beijing appealed the decision, which was seen as a potential precedent for a rare earths case at the WTO, but it remains unclear whether Japan, the United States or the European Union will take formal legal action.

September 6, 2011

Source: Reuters