August 8, 2012

China cuts mines vital to tech industry

China will cut production of rare earths -- minerals vital for technology makers worldwide -- by 20%, a move that threatens to inflame trade tensions between Beijing and Washington.

Rare earths are 17 minerals with magnetic and conductive properties that are used in most of today's electronic devices, including flat-screen televisions, smart phones, hybrid cars and weapons. Nearly all of the world's supply of rare earths comes from China.

China changed production rules, which will close down one-third of the nation's 23 mines and about half of 99 smelting companies, Jia Yinsong, director of the ministry's rare earths office, told China Daily Wednesday.

China implemented the rules to improve environmental conditions and help consolidate the industry, officials said. The new regulations boost the minimum annual output at mines to 20,000 metric tons and 2,000 tons per year for smelting operation -- a move which will weed out smaller operations.

The U.S., Japan and the European Union have complained to the World Trade Organization that China's rare earths export restrictions violate trade rules.

The minerals include cerium, neodymium, dysprosium, tungsten and molybdenum. Tungsten, for example, is used in electronics, automotive, aerospace and medical technologies. China produces 91% of the world's tungsten. Molybdenum is a metallic element used for filaments in light bulbs. China produces 36% of the world's molybdenum.

Rare earths are not actually "rare," and can be found in other countries - including the U.S. - but are difficult to mine safely. About a third of the world's rare earth deposits are in China but the country controls more than 90% of production, in part due to its lower labor costs and less stringent environmental regulations.

--CNN's Irene Chapple contributed to this report

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