China eyes export ban on rare metals used in hybrids and wind turbines

China's planned clampdown on exports of rare earth metals has ignited fears globally that production of hybrid cars and wind turbines will be hindered as the country moves to protect domestic supplies of the precious minerals.

The country mines more than 95 per cent of the world's rare earth minerals, which mostly come from Inner Mongolia and are a crucial component of numerous technologies.

China's effort to keep the mineral resources within its borders is being viewed in some quarters as an attempt to protect its own technological development and force more overseas companies to establish manufacturing facilities in the country.

A draft report, Rare Earths Industry Development Plan 2009-2015, released in July by the Ministry of Industry and Information Technology, proposes a total ban on shipments overseas of terbium, dysprosium, yttrium, thulium and lutetium.

It also calls for a number of metals – such as neodymium, europium, cerium and lanthanum – to fall under a combined export quota of 35,000 tonnes annually.

Neodymium is used to produce magnets for the electric motors found in hybrid cars and generators for wind turbines. China also accounts for 99 per cent of the world's supply of terbium and dysprosium, which help to maintain neodymium's magnetic properties at high temperatures.

In addition, lanthanum is a major component of hybrid car batteries. Each Toyota Prius uses about 11kg of rare earth elements, but will need almost twice as much under the automaker's plans to boost the hybrid's fuel efficiency, Jack Lifton, a US-based independent commodities consultant and strategic metals expert, told Reuters new agency.

The proposed ban appears to have been prompted by complaints filed in June by the US and European Union with the World Trade Organisation (WTO). They alleged that China's metal export restrictions were against WTO rules.

Every year since 2006, China has reduced the amount of rare earths that can be exported.

The US and EU claim that China's restrictions on exports of rare earths, bauxite, phosphorous, molybdenum, tungsten, antimony, coke, magnesium, zinc, silicon, molybdenum and other metals creates an unfair advantage for its domestic industries.

The Chinese government has rejected the charge that its restrictions on exports breach trade rules. In July, the state-run China Daily newspaper ran an editorial quoting a Ministry of Commerce representative who stated that the country's export policies concerning precious metals "are drafted to protect the environment and natural resources in accordance with WTO rules". He added that "restrictive measures are especially necessary for these strategic metals during the global recession".

The editorial also raised longer-term concerns over supplies of rare earth metals, citing a forecast from the Ministry of Land and Resources, which predicted that by 2020, "only six out of the 45 major mineral resources [will] meet the demand in China". It added that if exploitation continues at the current rate, in 30 to 50 years China will be "unable to boast leading places in wolfram, indium and rare earth reserves".

The draft proposal will need to be approved by the state council, China's highest governing body, before it can be formally enacted. There has been no indication yet as to when legislators will vote on the plan.