UPDATE 2-China cuts rare earth export quotas, US concerned

* US expresses concern over China’s export restraints

* Rare earth elements used in high-tech, clean energy
(Adds U.S. Trade Representative statement, Molycorp price)

BEIJING, Dec 28 (BestGrowthStock) – China announced on Tuesday it
will cut its export quotas for rare earth minerals by more than
11 percent in the first half of 2011, further shrinking
supplies of metals needed to make a range of high-tech products
after Beijing slashed quotas for 2010.

China produces about 97 percent of rare earth elements,
used worldwide in high-technology, clean energy and other
products that exploit their special properties for magnetism,
luminescence and strength.

The rare earth issue may further strain relations between
China and the United States, which have been battered this year
by arguments over everything from Tibet and Taiwan to the value
of the Chinese currency. Chinese President Hu Jintao is due to
visit the United States next month.

China’s Commerce Ministry allotted 14,446 tonnes of quotas
to 31 companies, which was 11.4 percent less than the 16,304
tonnes it allocated to 22 companies in the first half of 2010
quotas a year ago.

China slashed the export quota by 40 percent in 2010. The
export restraints on rare earths has inflamed trade ties with
the United States, European Union and Japan in particular.

In Washington, the U.S. Trade Representative’s office
expressed concern over the latest announcement.

“We are very concerned about China’s export restraints on
rare earth materials. We have raised our concerns with China
and we are continuing to work closely on the issue with
stakeholders,” a USTR spokeswoman said.

Last week, the trade representative’s office said China had
refused U.S. requests to end export restraints on rare earths,
and that the United States could complain to the World Trade
Organization, which judges international trade disputes.
[ID:nN23157001]

MOLYCORP SHARES RISE

After China’s announcement, shares of Molycorp Inc (MCP.N: ),
the Greenwood, Colorado-based company that owns a rare earth
mine in California, were up 10.5 percent to $54.69 in early
trading. [ID:nN28249774]

Wind turbines and hybrid cars are among the biggest users
of rare earth minerals, which analysts say are facing a global
supply crunch as demand swells.

This little-known class of 17 related elements is also used
for a vast array of electronic devices ranging from Apple’s
(APPL.O: ) iPhone to flat screen TVs, all of which are competing
for the 120,000 tonnes of annual global supply.

In a short statement on its website (www.mofcom.gov.cn),
the Chinese Commerce Ministry said it had added more producer
companies to the quota list, but cut volumes allocated to
trading companies.

Japan has been hard hit by the export curbs. Japanese
imports of rare earths shrank further in November, reflecting
the impact from China’s de-facto ban on shipments of the
minerals that was lifted late last month. [ID:nTOE6BQ02Z]

Japanese companies had complained about restrictions on
shipments of the metals by Chinese customs officials following
a spat over disputed islands in the East China Sea, which led
to the de-facto suspension by Beijing on exports from late
September.

The European Union has also expressed concern over China’s
limiting of rare earths’ exports, though the bloc’s trade
commissioner said earlier this month that China had reiterated
that rare earth supplies would be sustained. [ID:nTOE6BK01Q]

China says its curbs are for environmental reasons and to
guarantee supplies to domestic industrial consumers. But it has
also insisted its dominance as a producer should give it more
control over global prices.

Beijing has been trying hard to impose discipline on its
chaotic rare earth sector and is expected to establish a rare
earth industry association by May next year, said Wang Caifeng,
an official with the Ministry of Industry and Information
Technology, speaking at a conference on Tuesday.

Wang said he hoped the body would perform the same function
as the China Iron and Steel Association by ensuring the
“orderly development” of the sector through pricing and export
quotas.

Tougher environmental regulations for the rare earth sector
are also expected to be unveiled next year, the China Business
News reported on Tuesday.

(Reporting by Niu Shuping, David Stanway and Michael
Martina in Beijing; and Roberta Rampton in Washington; Editing
by Anshuman Daga, Vicki Allen and Will Dunham)

UPDATE 2-China cuts rare earth export quotas, US concerned