Monday, September 19, 2011

China Consolidates Grip on Rare Earths

China is on track to monopolize the rare earths industry by increasing prices on rare earth materials. This is causing companies in the United States and Europe to relocate to china, taking advantage of inexpensive raw materials.

China has caused the price of compact florescent light bulbs in the United States to soar by closing or nationalizing dozens of rare earth metals producers. China produces most of the world's rare earth materials, currently 95%, and is taking action to improve pollution controls in an effort to clean up the environment. However, by doing so, it is shutting down the infamously toxic mining industry, restricting the global supply of vital resources. The major green producers, like wind turbines, hybrid-gasoline electric cars and compact florescent bulbs, are the most heavily impacted by this action from china. Despite government subsidies, the high cost of rare earths is having a significant effect on green product companies. This is so drastic, that some companies are being reactive and buying and hoarding rare earths materials.

Even though china is stating that its reason for shutting down its rare earth industry was to "address" pollution problems, it is looking quite different to foreign trade companies. The European Union believes china is trying to dodge international trade rules by discriminating against foreign trade. The United States and Europe have been in in preparation of filing a case with the World Trade Organization saying the China is breaking W.T.O. Laws by imposing tariffs and quotas on rare earth exports. China is currently a member of the W.T.O. and promised that it would not enforce restrictions on exports, except a few small materials. Rare earth metals, was not one of those materials.

China is sticking to its story, saying that they are worried about high pollution in the environment. China says polluted water, air and radioactive residue is increasing. Especially with small private companies, since some of them operate without having a license.

A member of the Chinese Chamber of Commerce, Xu Xu stated, "The government is determined to clean up the industry. The entrepreneurs don't care about environmental problems, don't care about labor problems, and don't care about their social responsibility. And now we have to educate them."

One can only speculate that some hidden agenda is behind the green efforts from china. The Chinese government is creating a monopoly by shutting down private companies and forcing bigger companies to merge. China wants to consolidate 80 percent of the production from southern china and maintain 3 major companies. How ironic that these three major companies were once ministries of the Chinese government.

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