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Rampant smuggling and weak demand have led to a large decrease in the amount of rare earths exported from China through legal channels.
In the first half of the year, the amount of rare earths legally exported from China decreased by 42.7 percent year-on-year, falling to 4,908 tons, according to statistics from Chinese customs officials.
If the trend continues, fewer than 10,000 tons of rare earths will be legally exported from China this year, far less than the 31,130 tons that can be exported under a quota set by the Ministry of Commerce.
Since 2007, China has strengthened both its rules governing the production of rare earths and its export regulations and has set quotas every year to limit exports of the materials. Companies without specific production permits have been prohibited from mining rare earths.
Chen Zhanheng, director of the China Rare Earth Institute's research department, said that many small companies have been drawn to rare earths by the prospect of making large profits from them. Many of them have virtually ignored previous regulations and quotas meant to control the industry.
Industry experts said rampant smuggling has been a large cause of the decrease seen in legal exports of the materials.
A white paper released by the State Council last month reported that the amount of rare earths exported from China in 2011 was 2.2 times greater than the official amount recorded by Chinese customs officials.
Industry experts said the huge difference between the price the materials command in the domestic market and the price in foreign markets has tempted smugglers.
Europia, a kind of rare earth, goes for about 6,800 RMB ($1,060) a metric ton in China. In contrast, the same amount can fetch about 12,000 RMB a ton in international markets.
The current weak demand for the materials has also contributed to the decrease in exports, according to experts.
The price of rare earths, after increasing quickly last year, plunged in the first three months of this year and has generally remained flat since then. Experts said the chances of a price rebound are slim this year.
Rare-earth metals are essential in the manufacture of an array of high-tech products, including wind turbines and electric-car batteries. A downturn in the wind power and electric car industries has weakened the demand for them.
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