China sets up rare earths industry group

SHANGHAI (AP) ? China has set up a rare earths industry association to fend off trade complaints and help regulate the sector that is critical to global high-tech manufacturing.

The Ministry of Industry and Information Technology announced the group's founding Sunday, saying it would coordinate mining, smelting and processing and seek to form a "reasonable price mechanism" for the materials, used in many high-tech applications.

It said the group would help coordinate China's response to rare earth trade disputes such as a complaint alleging unfair market manipulation that was filed last month by the U.S., EU and Japan at the World Trade Organization.

Rare earths are used to make goods including hybrid cars, weapons, flat-screen TVs, mobile phones, mercury-vapor lights, and camera lenses. China has about a third of the world's rare earth reserves but supplies about 90 percent of what is consumed.

Beijing has imposed limits on rare earths production and exports, citing a need to impose order on an unruly domestic market and to reduce environmental damage, raising protests from Japan, the U.S. and other countries that rely on supplies from China.

A key aim is to rein in wide swings in prices, said Heng Kun, a rare earth analyst at Essence Securities, based in Beijing.

"The whole industry should just avoid price volatility. It does harm to all," he said.

Officials have denied accusations Beijing is using its quasi monopoly on the resources as a diplomatic bargaining chip, or to manipulate prices.

"Many countries in the world have rare earth reserves, you cannot rely on China alone to provide all the supplies," the official Xinhua News Agency quoted the newly appointed head of the industry group, Gan Yong, as saying.

The rare earths association includes 155 companies, including state-owned giants like Aluminum Corp. of China and China Minmetals Corp., the ministry said in a statement on its website.

Typically for China, central government policies aimed at curbing unlicensed mining and processing of rare earths had often gone unheeded by local level officials focused on maximizing tax revenues and creating jobs.

The new group could help regulators indirectly impose more "self-discipline" on the industry, Heng said.

The MIIT said the new industry group aims to consolidate smaller companies into large corporations, promote the industry's restructuring and "strictly enforce the mandatory production plan."

The newspaper China Business News reported Monday that only 56 of more than 350 rare earths producers had met environmental standards. It cited officials in Jiangxi province, where much of the mining is concentrated, as saying that the estimated costs for environmental repair, at 38 billion yuan ($6 billion), were much higher than profits earned over many years.

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Researcher Fu Ting contributed to this report.

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Follow Elaine Kurtenbach on Twitter: http://www.twitter.com/ekurtenbachsh

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