Sydney, 17 March 2011

Top industrialised nations need to act in concert to challenge China's curbs on rare earths exports and any restrictions by Beijing that could jeopardize manufacturing would be "deplorable", the European Union's Trade Commissioner said. Manufacturers also needed to step up efforts to diversify their sourcing of rare earths to reduce reliance on China, which produces around 97 percent of the world's rare earths, minerals crucial to production of high-tech goods from fibreoptic cables to smartphones and electric cars, Karel De Gucht said.

"I trust that we can come to a sensible understanding with China and to reach that, I think concerted action is very desirable and it is also happening," De Gucht told Reuters in an interview after meeting his Australian counterpart.

Four U.S. senators urged President Barack Obama this week to step up the fight against China for what they said was the "hoarding" of rare earths and Washington has said it could complain to the World Trade Organization about the restrictions.

China cut export quotas by 40 percent last year and reduced export quotas for the first half of 2011 by 35 percent compared to a year earlier due to what it said were environmental concerns over rare earths refining.

But De Gucht said the EU has extended a hand to China to solve its legitimate environmental issues and putting entire industries into jeopardy was not acceptable.

"They have been delivering with great appetite those rare earth materials in the past, I would say at prices which makes mining in other parts of the world quite impossible," De Gucht told Reuters in an interview.

"So if then all of a sudden they would interrupt or squeeze down their deliveries to a point that puts us in jeopardy, I would deplore this very much," De Gucht said.

But he said the dispute highlighted the need to find alternative supplies and he would meet with Australian rare earth firms on Thursday to discuss the framework of securing alternative supplies.

He declined to name the companies he was meeting but Lynas Corp is the closest to beginning production and said it expects the first feed of ore into the concentration plant at its Mount Weld rare earths project in Western Australia in the week starting March 31.

Arafura Resources, which owns the Nolans Bore rare earths mining project, plans to start up production in 2013. "We certainly have to look at other sources of rare earths," De Gucht said. He added that an upcoming WTO ruling on China's mineral exports could set the benchmark for how the rare earths dispute will pan out.

"Some time ago we have launched a case before the WTO on a number of minerals, not on rare earths, other ones. We are expecting in the coming days and weeks the result of that case and I think that could influence very much the climate," De Gucht said.

Sources familiar with the case said the WTO considers that China has export restrictions on raw materials that are questionable.

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