DAVOS-EU watching rare earths closely - trade chief

Thu Jan 27, 2011 6:54pm GMT

* Rare earths of "huge geo-strategic importance"

* EU consulting business, talking to China

By Jonathan Lynn

DAVOS, Switzerland, Jan 27 (Reuters) - The European Union is watching the market for rare earth minerals closely and is determined to secure supplies from China and alternative sources, its top trade official said on Thursday. EU Trade Commissioner Karel De Gucht declined to say whether Brussels would challenge China at the World Trade Organization over the elements, used in many high-tech goods.

"We are following very closely what is happening with rare earths," he told Reuters in an interview, describing the issue as being of huge geo-strategic importance.

Rare earths are used in electronics such as smartphones and hybrid cars as well as a number of defence applications.

European officials are consulting with affected business groups and raised the question of rare earth supplies at the highest level in China during the high-level economic dialogue held between the world's two biggest exporters last month.

China, which produces 97 percent of the global supply of the minerals, cut export quotas by 40 percent last year, leading to a fall in exports of one tenth in 2010 and alarming its trading partners. [ID:nTOE70I03O]

The cut-back, which China argues was taken for environmental reasons, rang alarm bells in the United States, Japan and the EU, particularly Germany where sophisticated industries are highly reliant on imported raw materials.   Continued...

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