The fate of US rare earth miner Molycorp Inc. rests on China’s efforts to crack down on smugglers who spirited 40,000 tonnes of the vital metals out of the country last year, driving down global prices, Reuters reported.
Debt-ridden Molycorp is the sole US domestic supplier of rare earths, which are used in everything from smartphones to military jet engines and hybrid vehicles.
In 2011, it relaunched its huge Mountain Pass mine in California expecting prices to stay high after China, which dominates world supply, restricted exports.
Last month, the firm filed for bankruptcy protection as operating losses mounted.
Customs police in the port of Qingdao, Shantung province, arrested five traders last month after a nine-month investigation into a rare earth and ferromolybdenum smuggling ring.
Chinese authorities have been struggling since 2010 to smash an illegal supply chain in which rogue miners deliver ores to unauthorized separation facilities.
The finished products are disguised and shipped abroad.
“Traders go through all kinds of channels and make false product declarations at customs — marking it as alumina or even washing powder,” the report quoted Chen Zhanheng, vice secretary general of the Association of China Rare Earth Industry, as saying.
The industry estimates that about 40,000 tonnes of rare earth oxides were smuggled out of China last year, more than the official export volume of 28,000 tonnes.
It has hurt overseas producers like Australia’s Lynas Corp. and Molycorp, the business plans of which were built on China’s efforts to restrict domestic supply and crack down on illegal production.
China controls around 90 percent of the world’s rare earth supply.
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