China ends export duties on rare-earth metals

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/19

At the beginning of May, export duties were abolished for 17 metals classed as rare-earth elements (REEs), as well as tungsten and molybdenum. The move is expected to have little impact on global prices, however, as the loss of duty revenue is to be offset by a resource tax of 7–27 %, based on metal sale price. In addition, export duties on certain aluminium products were abolished. China’s aluminium industry has long struggled with overcapacity issues.

China abolished REE export quotas in January. The quotas were reduced in 2010 that had caused REE prices to spike globally. The WTO last year condemned the quotas as a rule violation. China is not involved in any similar major trade disputes at the moment.

China used export quotas and taxes to protect its domestic processing industry. Officially the quotas are claimed to reflect the environmental impacts of producing REEs. The government has sought to reduce overcapacity in the REE industry by consolidating production into six large firms and shutting down illegal mining operations. The latest measures are hoped to reduce widespread grey production and REE smuggling, while boosting profitability in the sector. China, with under 25 % of the world’s REE reserves, accounts for over 80 % of the global production.

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