China is the supplier of around 95% of rare-earth metals to the world. These rare-earth metals are used in the manufacturing of the high-tech batteries, mobile phones, defense products and television sets. China declared a cut of around 35% on its quotes on the first-half of rare-earth metal exports in 2010. This increased the concerns of the international buyers and China has been criticized for trying to monopolies the market.
Traditionally, China used to adjust the second-half quotas after consulting the industries involved and analyzing the figures of the first-half. But this time the decision to cut the export quotas by 72% was taken by Beijing for the second half of the year. A decrease in supply, would drastically affect the Japanese technology manufactures. Issues were raised by many countries and they demanded that China should resolve this issue. The U.S. trade officials tried to persuade Beijing on this issue and also stated that they would bring the matter to the World Trade Organization (WTO). But the reality is Chinas restriction on exports does not violate the WTO rules and regulations.
As a result of the increase in prices by China, the U.S. and Japan are exploring new markets to fulfill their rare-earth metals demand. These alternative suppliers include Australia, Thailand and Mongolia. As for the Chinese officials, it was irrational for China to fulfill the rare earth metal requirements of the world when it only has 30% of global reserves. It is also predicted that the prices of the rare-earth metals will increase in the future. China is still confident that the dependency on it can never be eliminated and it will maintain its position in the global rare-earth metals market for a long period of time. But how long will the international community allow it to exploit its position, before finding other sources?