China Denies Hoarding Metals, Says It Just Wants to Create Jobs in Inner Mongolia

China Denies Hoarding Metals, Says It Just Wants to Create Jobs in Inner Mongolia

By Scott Doggett September 3, 2009

China's moves to tighten control on the mining and export of a class of metal ores called rare earth are aimed at attracting high-tech manufacturing to Inner Mongolia, and not at dominating the market, The Wall Street Journal reported today, citing a senior Chinese official.

As we reported earlier this week, a number of those rare metals are used to make the high-power, lightweight magnets for electric motors of hybrid cars, such as the Toyota Prius, Honda Insight and Ford Fusion. Others are major ingredients for batteries used in hybrid cars.

Wednesday's comments by Zhao Shuanglin, vice chairman of Inner Mongolia Autonomous Region, appear aimed at quelling concerns that China is trying to dominate the global market for rare-earth resources.

China produces more than 90 percent of the world's output of the metals. Recent steps by Beijing toward tightening export restrictions have sparked concern in other countries.

There also appear to be concerns about China's investment in rare-earth producers in other countries.

In Australia, the government has delayed yet again consideration of a $210 million investment by China Nonferrous Metal Mining Group Co. in Lynas Corp., an investment that would give the Chinese company a majority stake in the biggest new rare-earth mine currently under development.

Lynas, which unveiled the planned investment in early May, said Wednesday a 30-day review period by the Australian government's foreign investment review board had again been reset so that the board has until early October to consider the deal.

Last month, China's Ministry of Industry and Information Technology issued a draft policy of reducing the mining and exports of rare-earth metals.

The ministry aims to enact an annual export quota of 35,000 tons and potentially ban the export of at least five types of rare-earth elements,  Bian Gang, vice chairman of the China Nonferrous Metals Industry Association said last week.

Zhao, whose rank is equivalent to a deputy governor, said that China's planned steps aren't motivated by a desire to prop up the metals' prices but by desire to build up industries in Inner Mongolia, the center of its rare-earth resources.

"We do not focus on short-term gains in rare-earth prices," Zhao said. "We want rare-earth industries to locate in Inner Mongolia, and we're discussing with government departments to stabilize rare-earth prices."

Still, the call for high-end manufacturers to set up shop in Inner Mongolia may raise many of the same concerns as export restrictions by signaling that China intends to keep more of its rare-earth resources at home.

"It will certainly highlight to the world that these metals are strategic," said Rod McIllree, managing director, Greenland Minerals & Energy Ltd., an exploration and development company.

While not commenting directly on Zhao's remarks, McIllree told the Journal,  "If the supply is stopped, production outside of China is effectively finished."

Scott Doggett:  is an AutoObserver.com Associate Editor.