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China denies reports on halting export of rare earth

By Steven Jiang, CNN
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What the heck is rare earth?
  • White House looking into reports, spokesman says
  • "China will continue providing rare earth to the rest of the world," China says
  • Nation says it will limit mining, production and export of rare earth
  • China holds about a third of the world's rare earth deposits

Beijing, China (CNN) -- China vehemently denied Wednesday that it has halted export of rare earth materials amid news reports that Beijing started blocking shipments of the crucial minerals to the United States and Europe following similar measures against Japan.

"China will continue to provide rare earth to the rest of the world," the ministry of commerce said in a statement faxed to CNN. "At the same time, to protect exhaustible resources and achieve sustainable development, China will also continue to implement restrictive measures on the mining, production and export of rare earth."

The New York Times, citing anonymous industry sources, earlier reported that Chinese customs officials had imposed broader export restrictions Monday morning.

China Daily, the country's official English-language newspaper, quoted an unnamed official as saying the government would cut export quotas by as much as 30 percent in 2011.

Video: China's rare earths controversy

"Reports by some media outlets that China will continue to reduce export quotas of rare earth next year are completely baseless and wrong," the commerce ministry said. "The Chinese government will set reasonable export quotas for 2011, taking into consideration the production output, domestic and international demands, and the need for sustainable development."

China holds about a third of the world's rare earth deposits but accounts for 95 percent of the global output.

Rare earths comprise 17 elements, including scandium and yttrium, and lanthanides. In reality, they are "not rare," according to former U.S. Geological Survey official James Hedrick, but the amount of economically exploitable concentrations are limited. The materials are vital in manufacturing a wide range of products -- both civilian and military -- from mobile phones, batteries and compact fluorescent light bulbs to hybrid cars and guided missiles.

"There are hundreds of applications both in the commercial and defense sectors that people use every day" that depend on rare earth materials, Hedrick told CNN.

Beijing's critics see China as using its monopoly on the minerals as a weapon in trade or political disputes.

China reportedly stopped rare earth shipments to Japan, the world's largest rare earth importer, after Japanese coast guards detained a Chinese trawler captain near an island claimed by both nations.

The New York Times said the expanding embargo came after the U.S. government decided Friday to investigate claims that China had been illegally subsidizing its clean energy exports.

White House Spokesman Robert Gibbs said Wednesday that the National Security Council is looking into the reports.

"I asked our NSC guys to give me some guidance on this," Gibbs told reporters aboard Air Force One. "They've seen the reports, they're looking into it but don't have anything that they could confirm about those reports at this point.

He would not answer a question about how big of a concern China's halting exports of rare earth would be, if true.

"I'd rather get a sense of whether the reports are -- whether there's any validity to -- which they had not been given at that point," he said.

A spokeswoman for the Office of the U.S. Trade Representative told CNN that the agency is looking into the matter. U.S. Congressman Sander Levin, chairman of the House's Ways and Means Committee, called on the Obama administration to "immediately challenge these actions as World Trade Organization-inconsistent" if the report is proven to be true.

The Chinese commerce ministry said in its statement to CNN that the country's export controls on rare earth are not against WTO rules, and some analysts say Beijing's motives are more commercial than political.

"They are the largest consumer of the metals in the world and are really moving into high tech," said Martin Hennecke, an associate director at Hong Kong-based consulting firm Tyche Group.

"They want to secure their own supply, because China is consuming 60 percent of those metals there."

China insists that its recent restrictions on rare earth are long overdue, as unregulated mining in the country had been causing great environmental damage and depleting its own resources.

Developed countries that hold sizable deposits of rare earth, including the United States, have mostly ceased production because of high labor costs and tight environmental regulations. The controversies over China's moves on the materials have prompted calls in the United States to resume domestic production, with the House of Representative passing a bill aimed at re-developing the industry.

Hennecke said such programs will take time, not to mention that reasons to move production to China in the first place still remain.

"Other countries haven't developed the mines, because almost all of these rare metals come with elements that are radio-active or poisoning," he said. "Everyone is getting them cheap and easy from China without having to do the dirty work."

Hedrick, now an official at a large U.S.-based rare earth deposit owner -- said a processor in California that hopes to open its mine next year "would probably be the earliest that rare earth would be available from a large source."

He said that the world has been dependent on China for rare earth materials for decades.

"Starting back in the mid 1980s [China] began to ramp up production... and started putting them on the market at prices that were far below what they were typically selling for at that time," Hedrick said. "And all the rest of the world's mining companies ceased to operate and ceased to process and left it all up to China to provide that material."