Rare Earth: Save the Environment First

China’s rare earth industry has not only satisfied domestic demand for economic and social development, but also made important contributions to the world’s rare earth supply. Currently, China supplies over 90 percent of the global market rare earth needs with 23 percent of the world’s total reserves,(See Chart 1) its output of permanent-magnet, luminescent, hydrogenstorage and polishing materials, which use rare earths as raw materials, accounts for more than 70 percent of the world’s total, and Chinaproduced rare earth materials, parts and components, as well as rare earth end products, such as energysaving lamps, special and small electric motors and NiMH batteries, satisfied the development needs of high-tech industries of other countries, especially those of the developed countries.

Problems facing

Despite its rapid development, China’s rare earth industry also faces many problems, for which China has paid a big price. The following are some of the problems:

Excessive exploitation of rare earth resources. After more than 50 years of excessive mining, China’s rare earth reserves have kept declining and the years of guaranteed rare earth supply have been reducing. The decline of rare earth resources in major mining areas is accelerating, as most of the original resources are depleted. In Baotou, only one-third of the original volume of rare earth resources is available in the main mining areas, and the reserve-extraction ratio of ion-absorption rare earth mines in China’s southern provinces has declined from 50 two decades ago to the present 15. Most of the southern ion-absorption rare earth deposits are located in remote mountainous areas. There are so many mines scattering over a large area that it is difficult and costly to monitor their operation. As a result, illegal mining has severely depleted local resources, and mines rich in reserves and easy to exploit are are favored over the others, resulting in a low recovery rate of the rare earth resources. Less that 50 percent of such resources are recovered in ion-absorption rare earth mines in southern China, and only ten percent of the Baotou reserves are dressed and utilized.

Severe damage to the ecological environment. Outdated production processes and techniques in the mining, dressing, smelting and separating of rare earth ores have severely damaged surface vegetation, caused soil erosion, pollution, and acidification, and reduced or even eliminated food crop output. In the past, the outmoded tank leaching and heap leaching techniques were employed at ion-absorption middle and heavy rare earth mines, creating 2,000 tonnes of tailings for the production of every tonne of REO (rare earth oxide). Although more advanced in-situ leaching method has been widely adopted, large quantities of ammonium nitrogen, heavy metal and other pollutants are being produced, resulting in the destruction of vegetation and severe pollution of surface water, ground water and farmland. Light rare earth mines usually contain many associated metals, and large quantities of toxic and hazardous gases, waste water with high concentration of ammonium nitrogen and radioactive residues are generated during the processes of smelting and separating. In some places, the excessive rare earth mining has resulted in landslides, clogged rivers, environmental pollution emergencies, and even major accidents and disasters, causing great damage to people’s safety and health, and the ecological environment. At the same time, the restoration and improvement of the environment has also heavily burdened some rare earth production areas.

Irrational industrial structure. China’s rare earth industry has huge over-capacity in smelting and separating. On the other hand, the research and development of rare earth materials and components are lagging behind, its level of rare earth new materials development and end-product application technologies are significantly lower than the advanced international level, and the IPR ownership, and the production and processing technologies of new-type rare earth materials and components are relatively small in number. As a result, low-end products overflow while high-end products are in short supply. China’s rare earth metals industry, relatively small in scale, features a low concentration rate with numerous businesses, but lacks large enterprises with core competitiveness. Self-discipline in the industry is also weak, and vicious competition exists to some extent.

Severe divergence between price and value. Over quite a long period of time, the price of rare earth products has remained low and failed to reflect their value, the scarcity of the resources has not been appropriately represented, and the damage to the ecological environment has not been properly compensated for. Since the second half of 2010, despite the gradual rise in the price of rare earth products, the rise has been much lower than that of other raw materials like gold, copper and iron ore. From 2000 to 2010, the price of rare earth products rose by 2.5-fold, while that of gold, copper and iron ore increased by 4.4-, 4.1-, and 4.8-fold during the same period, respectively. See Chart 2, 3 and 4.

Grave smuggling. Due to multiple factors, including domestic and international demands, the smuggling of rare earth products to overseas markets continues to be a problem in spite of the efforts made by China’s customs listing it as a key criminal act to crack down on. From 2006 to 2008, the volumes of rare earth products imported from China, according to statistics collected by from foreign customs, were 35 percent, 59 percent and 36 percent higher than the volumes exported, as statistics released by the Chinese customs show, and the figure from foreign customs is 1.2-fold over the Chinese figure in 2011.

Solutions taken

To address the salient problems in the development of China’s rare earth industry, the Chinese government has tightened the supervision over it. In May 2011, the State Council issued Guidelines on Promoting the Sustainable and Healthy Development of the Rare Earth Industry (hereinafter referred to as the “Guidelines”), attaching more importance to the protection of resources and the environment, and the realization of sustainable development. According to the “Guidelines,” the government — in accordance with law —will strengthen control over the mining, production, circulation, import and export, and other links of the rare earth industry, and study and formulate as well as amend and improve related laws and regulations on the administration of this industry. The Chinese government has established an inter-departmental coordinating mechanism for the rare earth industry to make overall plans and study of the national strategy, program, plan, policy, and other important issues concerning the development of the rare earth industry. The state has also set up a rare earth office to coordinate and propose plans on the mining, production, reserve, and import and export of rare earth materials. The relevant departments of the State Council will perform their respective administrative functions accordingly. In April 2012, Association of China Rare Earth Industry was founded with official approval. It is expected to play an important role in promoting self-discipline in the industry, regulating the industrial order, and proactively carrying out international cooperation and exchanges, among other functions. A year or so has passed since the implementation of the “Guidelines,” the transformation of the development pattern of China’s rare earth industry has picked up speed, and significant improvement has been seen in its development order.

China strictly controls the total volumes of rare earth mining and production, and takes restrictive measures on the mining, production, consumption and export of rare earth products simultaneously. The state sets a reasonable quota for annual rare earth exports that basically satisfies the normal demand of the international market. Meanwhile, China tightens customs control, regulates the management of declarations to be filed by enterprises, and orders rare earth export enterprises to comply with the industrial policies, industry access and environmental standards. The state is reinforcing its supervision and control over export enterprises and the selfdiscipline of the industry. In accordance with the law, it investigates and punishes enterprises that export rare earth products clandestinely; export products procured from illegal channels or commit other acts disrupting the normal order of rare earth export. In 2011, the state carried out a special campaign to crack down on rare earth smuggling, during which it tracked down 769 tons of smuggled rare earth products and 23 criminal suspects in eight cases. Meanwhile, the state strictly bans the import of rare earth products containing radioactive substances that exceed the prescribed limits.

In recent years, China has been actively creating a fair and open environment for foreign investment, encouraging foreign investment in environment restoration, waste product recycling, and high-end application development and equipment manufacturing in the rare earth industry. Enterprises from the United States, Germany, France, Canada and Japan have invested a total of 6.1 billion yuan in China’s rare earth industry, establishing 38 sole-proprietorship and jointventure enterprises. Their products are mainly made for export to meet the needs of the mother countries of these investors. China encourages domestic enterprises to follow international practice and market rules to participate actively in international technological and economic cooperation in the field of rare earths.