Rare Earth: Calls for "reasonable" pricing

In the ongoing Sino-US rare earth trade dispute, the World Trade Organization (WTO) panel ruled that China’s imposition of export taxes and quotas on rare earth products violated international trade rules. However, China has appealed, arguing that its export controls were aimed at protecting natural resources and the environment, citing Article 20 of the General Agreement on Tariffs and Trade (GATT), which allows for general exceptions in the interest of environmental protection. The question remains: how can rare earths be priced fairly to support sustainable development across production, processing, and trade? Zhang Anwen, deputy secretary-general of the Chinese Rare Earth Society, highlighted that after the 1980s, the U.S. was once a major supplier of rare earth elements, along with several other countries. Over time, this pattern shifted, and China became the primary global supplier. With just 23% of the world's rare earth reserves, China meets over 90% of global demand, sometimes as high as 97%. This shift is closely tied to the low prices of Chinese rare earth products. However, Zhang explained that the “low cost” is not due to efficiency but rather to disorderly production and export practices. He pointed out that the real costs—especially those related to environmental and ecological protection—are often ignored. Mining and processing rare earths generate massive amounts of waste, leading to severe water and soil contamination. According to the U.S. Environmental Protection Agency (EPA), rare earth processing can pollute surface and groundwater with heavy metals and radionuclides. Acid leaching, commonly used in extraction, can render nearby land unsuitable for agriculture. Many countries, including the U.S., Australia, Russia, and India, have scaled back or halted rare earth mining due to high environmental compliance costs. For example, the U.S. Mountain Pass Mine and Australia’s Mount Weld Mine only recently resumed operations. These shifts have turned former exporters into importers. Industry experts argue that the current pricing of domestic rare earths lacks regulation. Taxes, sewage charges, and other environmental costs are often not reflected in market prices, failing to capture the true strategic value of these materials. Establishing a fair and scientific pricing mechanism is essential to ensure long-term sustainability. The U.S. publication *International Business Times* cited a Princeton University professor who stated that environmental pollution from rare earth production is not directly linked to exports, but rather to the production process itself. The professor also noted that controlling China’s rare earth exports may not necessarily reduce domestic production, as China itself consumes a significant portion of its output. According to Li Qing, a rare earth researcher at My Nonferrous Metals, the ratio of China’s rare earth exports to domestic consumption is roughly 1:4. Therefore, resource and environmental protection should primarily be the responsibility of the domestic market, which is the main consumer of rare earth products. Many industry players believe that the key for China right now is to regulate both the production and consumption of rare earths to align with international standards. This would help protect resources and prevent trade disputes. The anticipated formation of the “six major rare earth groups” is seen as a positive step toward market regulation. As Li Qing emphasized, once these groups are established, creating a scientifically sound pricing mechanism becomes even more critical. A reasonable price must reflect both the strategic importance of rare earths and compliance with international trade principles.

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