China to reform rare-earth exports after WTO ruling  

CNet reports that Chinese efforts to restrict the export of rare earths have been criticised by the WTO - China to reform rare-earth exports after WTO ruling.

China will reform its export of rare earths based in part on World Trade Organization rules, state media reported today, a day after the global trade governing body ruled against its curbs on exports.

The Ministry of Commerce will study and take steps forward in rare-earth export management, "according to relevant laws and World Trade Organization rules," the official Xinhua news agency quoted China's vice commerce minister, Zhong Shan, as saying.

The WTO ruled yesterday that China broke international law when it curbed exports of coveted raw materials such as bauxite, coke, and magnesium used in the production of steel, electronics, and medicines.

That ruling, initiated by a complaint filed by the United States, the European Union, and Mexico in 2009, was seen as a landmark that could have implications for the legality of China's rare-earth export quotas.

China produces 97 percent of the world's supplies of rare earths, a group of 17 minerals used in electronics and defense and renewable-energy industries.

Insisting that its high output levels are unsustainable and damaging to the environment, the central government slashed rare-earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts.

The decision has choked off global supplies, boosted prices, and angered China's trading partners.

An underwater bonanza of rare earth deposits discovered by Japanese scientists poses little threat to miners already developing major rare earth projects on solid ground.

Companies such as Molycorp, Lynas and Avalon Rare Metals may rest assured that developing the offshore bounty could take decades and cost billions, making it little more than a pipe dream, analysts say.

"'Desperado', that's the first word that comes to mind," said Jacob Securities analyst Luisa Moreno. "It makes for some nice headlines, but I don't think it would really be feasible to do this."

The discovery of the vast deposits, located on the floor of the Pacific Ocean, 3,500 to 6,000 meters (11,500 to 20,000 feet) below sea level, marks the latest bid by the Japanese to secure their own supply of rare earths, which are critical ingredients in the production of high tech products.

Prices for rare earth metals have skyrocketed over the last year as China, producer of some 97 percent of the global supply, has repeatedly clamped down on exports.

Dysprosium, which is used to make magnets for hybrid cars and smartphones, has soared to $3,600 a kilogram, up from $300 a kg a year ago, while neodymium, also used in magnets, is hovering at about $450 a kg, up from $45 late last year.

Outside China, Japan is the largest consumer of the group of 17 metals, and the breakneck price jumps have hit it hard. The country's demand for rare earths is expected to shrink by as much as 30 percent in 2011 as companies cut usage, sources told Reuters. "Obviously they are very frustrated and very desperate for alternatives," Moreno said.

She noted that the Japanese have been experimenting with rare earth recycling, and are also looking to invest in rare earth exploration projects around the world. "They want to be independent from China," she said. "These materials are really, really critical for their economy."

PUMP AND SEPARATE

With some 80 billion to 100 billion tonnes of contained rare earths, the underwater deposits outlined by Japan are certainly larger than any deposits found on solid ground -- but the feasibility of harvesting the metals from sea sludge is less clear.

According to Japanese scientists, it is simply a matter of pumping up the material from the ocean floor and using acid to extract the rare earths from the mud.

But analysts aren't so sure.

They point out that rare earths are notoriously tricky to process on a commercial level, and that development of the deposits, located miles underneath the sea, would be costly.

"The technology you would need, with the pressure and the corrosive factors that are there," said Dahlman Rose analyst Anthony Young. "I think this one falls into the camp of something that is less likely to ever be developed."

Certainly there are mining companies that see value in the ocean floor. Canada's Nautilus Minerals plans to develop an underwater copper project off the coast of Papua New Guinea, while the diamond industry has been mining off the Namibian shoreline for years.

But with hundreds of companies exploring and developing rare earth deposits on solid ground, analysts say the value of mining the metals underwater remains unclear.

"The cost of undersea mining, necessarily, is going to be high," said Byron Capital Markets analyst Jon Hykawy. "The value of the mined products must therefore be high "Rare earths have become pricier, but they are by no means pushing the levels of the prices of really rare materials such as gold."