In the wake of the failure of China's rare earth case at the WTO, some export tariffs on rare earth products are expected to be lifted. This move signals a renewed focus on tightening state control and regulatory integration of the rare earth industry. According to recent reports from the *Economic Information Daily*, multiple government departments—including the State Administration of Taxation, the Ministry of Industry and Information Technology, and the Ministry of Finance—are currently discussing potential measures to increase the resource tax on rare earths. It is anticipated that these changes may be announced in the second half of the year.
Industry insiders view the proposed tax hike as a key tool for managing the rare earth sector more effectively. The goal is to elevate market prices by increasing the cost at the source, reflecting the true value of these scarce resources and the environmental costs associated with mining. By raising prices, the government aims to rebalance supply and demand, curb smuggling, and reduce stockpiling by domestic players. Additionally, this policy could help mitigate the negative impact of the WTO loss on China’s overall rare earth management strategy.
China has long sought to shift away from treating rare earths as a commodity akin to "cabbage," and has implemented various policies over the years. Starting in 2007, the country introduced mandatory production planning and gradually reduced export quotas. In 2011, export tariffs were increased on certain rare earth products, and the resource tax was significantly raised for the first time. At that time, the tax rate for light rare earths like fluorocarbon bastnasite and monazite was set at 60 yuan per ton, while medium and heavy rare earths such as ion-adsorption ores were taxed at 30 yuan per ton—more than ten times higher than previous levels.
A senior executive in the rare earth industry told the *Economic Information Daily* that a further sharp increase in the resource tax would raise operational costs for companies. However, it also demonstrates the government's continued commitment to strictly controlling the sector. As a result, rare earth prices may rise in response to these new measures.
Recent data highlights the challenges facing the industry. After a prolonged decline in the fourth quarter of 2013, rare earth prices hit their lowest point since mid-2013. For example, in Baotou—a major rare earth production hub—34 large-scale enterprises operated at an average rate of 91.2% in the first quarter of 2014, but sales revenue fell by 25.3% year-on-year, with profits dropping by 4.7%. Export figures also declined sharply, with delivery values falling 47.2% compared to the same period in 2013.
Companies with mining rights, such as Baotou Steel Rare Earth, Xiamen Tungsten Industry, Minmetals Rare Earth, Guangyu Nonferrous, Chinalco, and Luzhou Rare Earth, are likely to benefit first from these regulatory changes.
Notably, global economic slowdowns and reduced domestic demand have led to a significant drop in rare earth prices. This has eased pressure on foreign countries to develop new mining projects. While the U.S. recently reopened an old mine in California and Malaysia has been sourcing rare earths from Australia, interest in building new mines outside China has waned considerably.
Analysts suggest that the scarcity of rare earths will soon be addressed through taxation. According to the European Economic Research Center, China is expected to maintain its dominant position in the rare earth market until 2020. Currently, about 90% of the world's rare earth supply comes from China. With the removal of export tariffs, foreign demand may return, but only through stricter domestic regulation can China continue to protect its precious resources.
China’s remaining rare earth reserves stand at around 27 million tons, down from over 70% of the world’s total in the past to just 30% today. At the current rate of extraction, China’s medium and heavy rare earth reserves may only last another 15–20 years, making future imports increasingly likely.
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