China acts to rein in illegal activity in rare earths

Eight government departments led by the Ministry of Industry and Information Technology have issued a circular to crack down on illegal activities in the rare earth industry.

The circular was issued after four teams checked production and business activities in seven provinces including Anhui, Jiangsu and Hunan last December.

The investigation found some enterprises allegedly involved in illegal trade and manufacture of rare earth products under the guise of recycling.

The authorities have required related departments to investigate and punish those who violate the laws and regulations and expose them in the media. Results of the investigation are required to be reported to appropriate ministries by April 20.

Du Shuaibing, an industry analyst, said the move shows the government is determined to stop violators and gives a positive signal in pushing up rare earth prices and maintaining a strong rare earth market this year.

The MIIT recently announced plans to further integrate all rare earth mines and separation enterprises in the country with the focus on six leading groups including Aluminum Corp of China, Xiamen Tungsten Co Ltd and Baotou Iron & Steel Group Co Ltd.

The move is expected to consolidate the industry to better explore, produce and market the valuable resource.

Between 2011 and 2014, profits in China's rare earth industry tripled to more than 44 billion yuan ($7.15 billion), said the ministry

Su Bo, MIIT vice-minister, said removal of the quota system is expected to increase the number of exporting firms, resulting in fiercer competition that demands regulation to prevent vicious price wars.

Following a World Trade Organization panel ruling last March, China ended a quota system previously aimed at restricting exports of rare earths.

The Ministry of Commerce issued a notice at the end of December that abolished export quotas for rare earths, a key material in defense industry components and modern technologies ranging from iPhones to wind turbines. Export quotas were also abolished on tungsten, molybdenum and fluorspar.

Joining the MIIT in the crackdown are the ministries of public security, land and resources, and environmental protection, as well as the General Administration of Customs, the State Administration for Industry and Commerce, the State Administration of Work Safety, and the State Administration of Taxation.