China Inspects Rare-Earth Production

China has started a new round of inspections aimed at strengthening the monitoring of rare-earth production, in a sign that Beijing is likely to continue to keep a tight control over production of the key minerals into next year.

The inspections, which China’s Ministry of Industry and Information Technology disclosed late on Monday, are intended to combat illegal exploration, production and exports. They began on Nov. 11, the ministry said.

China controls almost the entire global supply of rare-earth minerals, which are used in everything from wind turbines to hybrid-car batteries to military equipment. Its efforts to limit exports and restructure the industry have sent prices surging, though they have shown signs of moderating in recent months.

The inspections are unlikely to have an impact on immediate supply, an official involved with them told The Wall Street Journal. But the findings could have an impact on next year’s working plan and quotas, the official said.

“At the end of the year, Beijing wants to know how these regulations have worked, and the new round of inspection is like a summing up and preparation for next year’s work,” said the government official. “They also want to show that regulating the industry will [continue].”

China stepped up efforts to regulate rare-earth mining last year by imposing smaller export quotas and issuing stricter environmental standards, citing the need to protect the resources from over-exploitation and low export prices.

That set off a surge in prices for rare-earth minerals such as lanthanum, often used to make catalysts for refineries, and cerium, which is sometimes used in glass. Pricing data can be unreliable in part because global production volumes of rare earths are quite low, but Australian miner Lynas Corp. estimates that lanthanum is fetching about $65 per kilogram and cerium $60 per kilogram, nearly three times last year’s prices.

Still, the prices for those two minerals are roughly half that of the second quarter of this year, Lynas estimates. Companies that use rare earths have looked for ways to reduce the amounts that go into their products, while miners have looked for sources outside China.

With greater exports controls and production picking up in other countries, China’s share of rare-earth production may have fallen this year. Still, China is expected to remain by far the biggest supplier of these minerals in the foreseeable future.

The inspections, which are being conducted by MIIT and the Ministry of Land Resources, will include spot visits to three to five companies in each province or district. Local customs departments will be required to provide information on steps taken to combat rare-earth smuggling, said the statement.

The inspections, taking place through Nov. 25, will be carried out in a number of provinces around China.

Wall Street Journal