China Raises Export Taxes of Some Rare Earths to 25%

Annealed neodymium iron boron magnets sit in a barrel. Photographer: Doug Kanter/Bloomberg

China, which supplies more than 90 percent of the world’s rare earth minerals, will raise the export taxes for some elements to 25 percent next year, the Ministry of Finance said.

The move is an increase from the 15 percent temporary export tax on neodymium, used in batteries for hybrid cars including Toyota Motor Corp.’s Prius. Lanthanum, also used in hybrids, and cerium, used for polishing semiconductors, were not taxed in 2010, and will be taxed at 25 percent in 2011, the ministry said yesterday, without giving a reason.

Rare earths are 17 chemically similar elements including neodymium, cerium and lanthanum. The price of neodymium oxide, also used in magnets in BlackBerrys, has surged more than four- fold to $88.5 a kilogram from $19.12 in 2009 because of rising demand and reduced supply from China, according to Sydney-based Lynas Corp., which is building a A$550 million ($542 million) rare earths mine in Western Australia.

“The move is aimed at regulating the rare earth trade,” Peng Bo, an analyst at Guosen Securities Co. said by phone from Shenzhen. “The government simply wants the same tax standard to apply to all key rare earth elements of which it wants to control shipments.”

Quotas Slashed

Demand growth for neodymium and dysprosium may be around 15 to 20 percent per annum, Damien Krebs, metallurgy manager of Australia’s Greenland Minerals and Energy Ltd. said in an interview on Nov. 10. Neodymium is also used in mini hard drives in laptops and headphones in Apple’s iPod.

Prices of cerium oxide climbed sevenfold in the six months to October, London-based Metal-Pages Ltd., which tracks rare- earth prices, said Oct. 23.

“A 25 percent increase in export taxes won’t affect the business” as it can pass the material costs onto products, said Toshinori Hata, a spokeswoman for Hitachi Metals Ltd., Japan’s largest maker of rare earth magnets.

China slashed export quotas for rare earths by 72 percent in the second half of this year, sparking a surge in prices and highlighting global dependence on Chinese shipments. Government agencies are still working on next year’s export quota, commerce ministry spokesman Yao Jian said yesterday.

In a study of 14 rare-earth elements, the U.S. Energy Department found that supplies of dysprosium, which is used to make wind turbines and electric cars, may fall short of demand, David Sandalow, assistant secretary for policy and international affairs said on Dec. 15 in Washington.

China’s export tax for dysprosium will be kept at 25 percent next year, and the same with terbium, according to the statement of China’s finance ministry.

It takes seven to 10 years to obtain permission to open a new mine in the U.S., the longest among the top-25 mining countries, the Energy Department said in a report on Dec. 15. The department plans to begin research into critical materials and to work with Japan and nations in Europe to lower the risk of supply disruptions.

--Xiao Yu and Feiwen Rong. With assistance from Masumi Suga in Tokyo, Jim Snyder and Jim Efstathiou Jr. in Washington. Editors: Alan Soughley, Keith Gosman

To contact the Bloomberg News Staff on this story: Xiao Yu in Beijing at yxiao@bloomberg.net

To contact the editors responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net;