China launched Wednesday its first spot trading platform for rare earths led by its largest producer Baotou Steel Rare-Earth Hi Tech in an attempt to provide greater price transparency and better regulation. But Dan McGroarty, President of mining company US Rare Earths, isn’t buying into that.
He says that transparency isn’t what China is looking to achieve, it’s about consolidation and control. McGroarty adds that China’s rare earths trading platform is another step in China’s pursuit of vertical power, where “they move from control of production to control of pricing.”
McGroarty told CNBC’s “The Call”, that “this is what happens when one country provides 95 percent or so of global supply. In many cases a trading platform would give you price discovery, but not with this level of domination by one country.”
Beijing accounts for more than 95 percent of the global output of rare earths, a group of 17 minerals used in the electronics, defense and renewable energy industries.
In recent years China has come down heavily on illegal mining, imposed production caps and set export quotas citing depletion of resources and environmental damage. But this has irked importers of rare earths who complain they have to pay more now owing to China’s restrictions.
In mid-March, the United States, Europe and Japan filed a complaint to the World Trade Organisation against China’s policies.
But McGroarty says there’s no use blaming China and the rest of the world will have to start mining its own resources of rare earths. “They can bring those out of the ground and contribute to the supply picture,” he said.
McGroarty adds that when the US, Canada, Australia and Africa start to add to rare earths supply in several years, China will become a net importer.