The Mining Report: In early January on your Technology Metals Research blog you wrote, “China is still as much in charge of its rare earth elements (REE) supply as it ever was,” after China abolished export quotas in favor of an export licensing system. What is the Chinese government’s goal here?
Gareth Hatch: It’s twofold. One is to get control of its entire REE supply chain, but it’s also about generating more revenue. China is going to abolish REE export tariffs, which is a requirement of the recent World Trade Organization (WTO) ruling, and that will happen in May. By doing so, China is saying, “We’ll sort of play by the WTO rules.” But Chinese officials are now talking about replacing tariffs with a value-added resource tax.
Another noteworthy aspect of these measures is that a considerable percentage of REE exports from China are smuggled out of the country and that means lost tax revenues. China is trying to address those leaks. The new system requires that a license be issued on a shipment-by-shipment basis, but it’s not quite clear yet what set of rules and regulations are applied internally or what paperwork is required. That was likely reflected in the lower-than-expected REE export numbers in January.
TMR: There’s also some government-mandated consolidation happening in China’s REE space. What is happening and why are those changes important?
GH: This has been going on for well over a year. Chinese authorities are consolidating the industry into six conglomerates, referred to as the “five plus one.” The one is the large entity in northern China that used to be Baosteel, now called China Northern Rare Earth Group, which controls most of the country’s light rare earth production. …read more