Hi-tech giants shudder as China cuts rare metals

China has struck fear into Western governments and electronics giants by slashing exports of a highly sought-after array of metals which are crucial for electronics products ranging from iPads and x-ray systems to low-energy lightbulbs and hybrid cars.

In a sign of its growing industrial and political clout, China has cut its export quotas for rare earth elements (REEs) by 35 per cent for the first six months of 2011, threatening to extend a global shortage of the minerals and intensifying a scramble to find alternative sources.

Mines in China supply 97 per cent of the world's rare earths, 17 obscure metals which possess various qualities, such as conductivity and magnetism, that make them an essential component in many modern applications such as smartphones, computers and lasers.

Instead of last year's 22,282 tonnes, China's Ministry of Commerce revealed the total for the first six months of next year would be 14,446 tonnes, split among 31 domestic and foreign-invested companies.

Commentators said the announcement was probably designed to limit the environmental damage caused by the mines while ensuring manufacturers were able to meet growing domestic and international demand.

However the announcement caused dismay among Western governments, which have belatedly begun to appreciate that China's stranglehold on elements such as lanthanum, used for batteries in hybrid cars, and neodymium, for permanent magnets in wind turbines, gives it immense economic and political power.

The US Trade Representative's office, which advises President Barack Obama, said it had raised concerns with China over the export restraints. Britain, which previously said it was monitoring whether China's stance on REEs broke World Trade Organisation rules, reiterated its commitment to "free, fair and open markets". A spokesman for the Department for Business said: "Competitive markets are essential to achieving long-term sustainable growth, which is why the UK supports the need to cut red tape and resist protectionism."

Electronics companies could be hard hit by rising prices caused by the export cut, which was predicted by the Independent in January.

Consumer electronics giant Sony described the move as an obstacle to free trade. "At this point in time there is no direct impact on our company. But further restrictions could lead to a shortage of supply or rise in costs for related parts and materials. We will watch the situation carefully," a Sony spokesman said.

Other manufacturers, such as Apple, whose iPad uses rare earths, declined to comment.

A global scramble for rare earths has now begun, according to Gareth Hatch, an analyst at Technology Metals Research, in Illinois.

"We have a race against time," he said. "We've found the materials, we know where they are, now we have to develop them."

- Independent