Germany warns of China grip on rare earths market

Economy Minister Rainer Bruederle today warned at a conference organised by the Federation of German Industry, or BDI, that the market for the metals had become "critical", after China imposed export restrictions on the metals.

"We are severely affected when it comes to energy resources and...rare earths, which are growing scarce," Bruederle said. Rare earths are 17 different minerals necessary in the production of high-tech devices, including cell phones, missiles and solar energy panels.

The German warnings are the latest in a growing tussle between China, which produces 97 per cent of the world's rare earths supply, and the world's leading economies. Over the past 10 months, China has decreased exports of rare earths by 40 per cent.

"Raw materials have become a geopolitical issue. We need raw materials like we need air to breathe," said Hans-Peter Keitel, BDI president. Bruederle noted that procuring rare earths is vital for the high-tech sector in Germany, the second largest world exporter behind China in 2009.

"It would be best if we could agree at the World Trade Organisation on rules to ensure a minimum of competition to secure the worldwide rare earths markets," Bruederle said. But WTO General Director Pascal Lamy stressed the current difficulties in regulating the market.

"When raw materials are highly concentrated in some countries the border between trade and certain domestic policies is often blurred," he said. The Chinese government has attributed its restriction of rare earth exports to a desire to protect its environment and guard against over-exhaustion of the precious resources, but denies a state-run newspaper report that it will cut shipments by up to 30 per cent next year.

China holds about 30 per cent of global rare earths deposits, but controls the vast majority of the world's mines still in operation. The US, Canada and Australia all stopped mining rare earths in the 1990s, opting to import lower-cost Chinese supplies instead.