China wields its powers on rare earth mineral quotas again

The rare earth controversy heats up yet again after China cut its rare earth export quotas by 11 percent for 2011, according to a statement by the Ministry of Commerce.

The Ministry issued the first batch of 2011 rare earth export quotas on Tuesday and allotted 14,446 tonnes of quotas to 31 companies, compared to the 16,304 tonnes allocated 22 companies in the first batch a year ago.

Investors await reactions from various countries and recipients of the rare earth mineral which is used for various technological devices including various superconductors, cellphones and other gadgets that are used for both commercial and military purposes.

More than 90 percent of the world's rare earth is mined in China, who have been accused of using the mineral as a political weapon.

China had denied reports in October that it would cut rare earth export quotas by 30 percent.

Wang Caifeng, who was the deputy director at the Ministry of Industry and Information Technology at the time overseeing the sector, told Bloomberg that China might actually raise the production cap and export quota slightly next year.

China's controversies with the mineral have been on since October this year when it suspended exports of rare earth to Japan in September after the two countries had territorial dispute as the latter detained a Chinese fishing captain whose boat collided with Japanese patrol boats in September.

Following that, media reports stated that China also blocked rare earth shipments to the European Union and the United States. There was speculation that the announcement came after there were indications that the American trade officials would investigate if China was violating World Trade Organization rules by subsidizing clean energy exports and limiting clean energy imports.

The investigation was expected to look into China's reduction of rare earth export quotas since 2005, which could be regarded as an attempt to ensure that more manufacturing of high-technology goods would occur in the region by other companies.

China's Commerce Ministry had denied the New York Times report at the time.

However, the EU began hunting for other sources of rare earth and looked to increase its bilateral trade agreements with Africa, Central and Latin America.

Trade negotiations were also on with India, Canada and Russia among other countries, a report stated.

The latest move by China might worsen its relationship with the U.S., which had stated last week that it might file a complaint with the WTO regarding restraints on supplies of the rare earth mineral.

China said it will also raise export taxes for some rare earth elements to 25 percent next year.

The move is an increase from the current 15 percent temporary export tax on neodymium, used in batteries for hybrid cars including Toyota Motor Corp's Prius, Bloomberg reported.