Illegal trading threatens China's rare earth industry

The recent crackdown on a major rare earth smuggling case has again raised concerns about China's illegal rare earth mining and trading. In November, customs of Baotou City in north China's Inner Mongolia Autonomous Region, the world's largest rare earth production base, ferreted out 130 tonnes of rare earth products valued at 14 million yuan (2.3 million U.S. dollars), which had been smuggled in batches from a local private company to the KAD company in Vietnam beginning in December 2012. Several rare earth smuggling cases involving more than 100 million yuan (16.5 million U.S. dollars) have been busted by Qingdao and Shenzhen customs in recent years. "Illegal production and trading is the biggest threat to the country's rare earth industry," said Zhang Zhong, general manager of Baotou Steel Rare Earth Hi-Tech Co. Ltd. According to Baotou Rare Earth Research Institute, the domestic and global markets have been glutted with illegal rare earth products, which has adversely affected the prices of rare earth products and disturbed the industry order. "In 2012, the production quota for the southern ionic rare earth mines was 134 million tonnes. However, later statistics showed that the real output was 347 million tonnes," said Ma Rongzhang, secretary-general of the Association of China Rare Earth Industry. Of the 400 kinds of rare earth products that China provides, only about 50 to 60 of them are included in the tax catalogue. Experts said that illegal mining and production allow mining companies to evade taxes and therefore gain tremendous profits, which make it hard for law-abiding companies to survive. The government has made some attempts to curtail illegal mining. Fourteen illegal mining cases were busted and 14 illegal mines have been shut down during the past two years, according to Ministry of Industry and Information Technology. A three-month campaign led by eight ministerial departments was launched to crack down on illegal rare earth mining, production and trading starting in August. However, campaigns are only effective in the short term, and illegal mining will resurface after the campaign is over, industry experts said, adding that a mechanism should be created to eradicate the illegal rare earth mining and production chain. According to Ma and other experts, rare earth metal sources should be controlled by authorized departments, any related responsibilities that fall to local governments should be specified, and a law enforcement system should be established as soon as possible to regulate the industry.