China Is Said to Halt Exports to U.S.

of Some Key Minerals

By KEITH BRADSHER

Published: October 19, 2010

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HONG KONG — China, which has been blocking shipments of crucial minerals to Japan for the
last month, has now quietly halted shipments of some of those same materials to the United States
and Europe, three industry officials said on Tuesday.

Related
• Decline in Rare-Earth Exports Rattles Germany (October 20, 2010)

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The Chinese action, involving rare earth minerals that are crucial to manufacturing many
advanced products, seems certain to further ratchet up already rising trade and currency tensions
with the West. Until recently, China typically sought quick and quiet accommodations on trade
issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese
officials are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of
whom insisted on anonymity for fear of business retaliation by Chinese authorities. They said
Chinese customs officials imposed the broader shipment restrictions Monday morning, hours
after a top Chinese official had summoned international news media Sunday night to
denounceUnited States trade actions.

China mines 95 percent of the world’s rare earth elements, which have broad commercial and
military applications, and are vital to the manufacture of diverse products including large wind
turbines and guided missiles. Any curtailment of Chinese supplies of rare earths is likely to be
greeted with alarm in Western capitals, particularly because Western companies are believed to
keep much smaller stockpiles of rare earths than Japanese companies do.

China’s commerce ministry has repeatedly denied that it has imposed an embargo on shipments
to Japan, even though Japanese ministers and industry executives say the shipments to their
country have been systematically blocked by Chinese customs officials since Sept. 21.

Officials at the media relations office of China’s commerce ministry did not respond all day
Tuesday to e-mail or to telephone calls, seeking confirmation of the expanded embargo.

A few rare earth shipments to the West had been delayed by customs officials in recent weeks,
industry officials said, but the new, broader restrictions on exports appear to have been imposed
Monday morning. They said there had been no signal from Beijing of how long rare earth
shipments intended for the West would be held at the docks by Chinese customs officials. Nor is it
clear if occasional shipments are still being allowed out of the country, or if all shipments have
now been suspended.
Word of the blocked shipments emerged from industry executives on Tuesday after, earlier in the
day, an official China newspaper reported that Beijing planned further reductions next year to its
annual export quota for rare earths.

American trade officials announced last Friday that they would investigate whether China was
violating international trade rules by subsidizing its clean energy industries. The inquiry includes
whether China’s steady reductions in rare earth export quotas since 2005, along with steep export
taxes on rare earths, are illegal efforts to force multinational companies to produce more of their
high-technology goods in China.

That American announcement provoked an uncommonly fierce reaction from China. On Sunday
evening, in an extremely rare move for a senior Chinese official, the country’s top energy policy
maker, Zhang Guobao, called in reporters from international media organizations and lashed out
against the American move.

Hours later, according to industry officials, Chinese customs officials began singling out and
delaying rare earth shipments to the West.

Despite their name, most rare earths are not particularly rare. But new mines elsewhere will
probably take three to five years to reach full production, according to industry executives.

Congress is considering legislation to provide loan guarantees for the re-establishment of rare
earth mining and manufacturing in the United States. Most of the industry has moved to China
over the last two decades because of lower costs and weak environmental enforcement there.

China, which in July said it was cutting this year’s export quota of rare earths by 72 percent, is
preparing further reductions in its 2011 quota, the official newspaper China Daily said Tuesday.
The Chinese government plans a further reduction, of up to 30 percent, next year, in an attempt to
conserve dwindling reserves of the materials, according to the report.

Rare earth industry officials had been expecting a further reduction but were uncertain of the
amount.

The Office of the United States Trade Representative, which is part of the White House, had a
cautious reaction Tuesday to the China Daily report.

“Pursuant to our recent announcement, we are investigating whether China’s actions and policies
regarding restrictions on rare earth exports are consistent with W.T.O. rules,” said Nefeterius A.
McPherson, a spokeswoman for the office. “We will be monitoring any new developments with the
same concerns in mind.”
Dudley Kingsnorth, a rare earth market analyst at the Industrial Minerals Company of Australia in
Perth, said that if China adopted a further reduction in export quotas of 30 percent for next year,
manufacturers elsewhere could face difficulties.

“That will create some problems,” he said. “It’ll force some people to look very carefully at the use
of rare earths, and we might be reverting to some older technologies until alternative sources of
rare earths are developed.”

Hiroko Tabuchi contributed reporting from Tokyo.