Australia Blocked Rare Earth Deal on Supply Concerns

In 2009, Chinese state-owned China Non-Ferrous Metal Mining (Group) Co.was in talks with Australian mining company, Lynas Corp., to become the majority stakeholder in developing a new mine at Mount Weld, the site of the world’s richest rare-earth deposits.   This Chinese proposal was denied by the Australian government and newly unclassified documents shed light on what prompted this decision. From Bloomberg News:

Minutes of a meeting by the review board on Sept. 23, 2009, obtained by Bloomberg News through an Australia Freedom of Information Act request, show a concern the deal could undermine Australia as a reliable trading partner.

“We have concluded that they would not be able to exclude the possibility that Lynas’ production could be controlled to the detriment of non-Chinese end users,” the minutes show. That would have been “inconsistent with the government’s policy of maintaining Australia’s position as a reliable supplier to all our trading partners and hence potentially contrary to national interest.”

Even without Lynas, China controls more than 95 percent of the world’s supply of rare earths, used in Research in Motion Ltd.’s BlackBerrys, Apple Inc.’s iPods and General Dynamics Corp. tanks. In 2010, China said it would slash of the metals, souring ties with major users including the U.S. and Japan and causing prices to surge.

This revelation once again underscores that many countries fear China will manipulate its overwhelming dominance over rare earth exports for her own ends. The controversy over Chinese rare earth exports became an international concern late last year when China blocked shipments of rare-earth minerals to Japan following territorial disputes at sea.

The release of these documents coincides with a recent address Premier Wen Jiabao gave to the Cabinet regarding the future of China’s rare earth industry. On Wednesday, he announced that China would begin to enforce stricter regulations and quotas concerning rare earth mining and exports. From Reuters:

“We will fully take into account both domestic resources, production and consumption as well as the international market, and reasonably set annual quotes for total volumes of rare earth mining production and for exports,” said an official account of the meeting carried on the central government’s website (

It will take five years for China to create an orderly and efficient rare earths sector, the statement cited Wen as saying.

China has cut export quotas for the first half of 2011 by 35 percent from the first half of last year, although total quotas for this year have not yet been announced. China says the quota cuts will prevent reckless and polluting mining of deposits.

China’s moves have raised hackles in major trading partners such as the United States, European Union and Japan. The U.S. Trade Representative office has threatened to take China to the World Trade Organisation about its export restraints.

In light of these new developments, it seems that speculation and concern over China’s rare earth exports will have yet to die down.


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