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FOR IMMEDIATE RELEASE: January 18, 2011

SCHUMER: CHINA'S ILLEGAL HOARDING OF RARE EARTH ELEMENTS WREAKING HAVOC ON HIGH-TECH AND MANUFACTURING BUSINESSES IN BUFFALO; ON EVE OF KEY VISIT, SCHUMER URGES ADMINISTRATION TO CONFRONT PRESIDENT HU AND DEMAND THEY PLAY BY THE RULES


Chinese Government Withholding Exports of Critical Minerals And Increasing Export Taxes In Possible Violation Of International Law- Driving Up Production Costs for Companies Across the State

Buffalo Company Ceno Technologies Relies On Rare Earth Elements For Essential Research Purposes and Has Seen Their Production Price Skyrocket

Rare Earth Elements Needed to Construct

Today, U.S. Senator Charles E. Schumer announced that he is urging U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke to take actions to end unfair Chinese trade practices involving the exports of rare earth elements. Specifically, he advocated that this be made a top priority in discussions between President Obama and Chinese President Hu Jintao when he visits the United States this week. Of all rare earth elements that are industrially mined, 97% are controlled by China.  In recent months, the Chinese government has imposed strict export restraints and sky-high export taxes on rare earth elements. This has meant a cheap and plentiful flow of rare earth elements within China, and an expensive and drastically limited global supply. The Chinese government's actions have created yet another unfair advantage for Chinese manufacturers, causing markedly higher costs increases for high-tech and manufacturing companies in New York that produce items ranging from batteries to wind turbines, and from laser-guided weapons to night vision goggles.

 

"From currency manipulation to hoarding rare earth minerals, the Chinese have time and time again violated international treaties and trade agreements to help their economy at the expense of others," said Schumer.  "The time for talk is over, and the Administration must seize the opportunity of President Hu's visit to press China to end these practices, which are damaging companies and job growth in Rochester, Buffalo, and across the state and the country."

 

Schumer made the announcement at the Innovation Center in Buffalo, where Ceno Technologies will soon be housed. Ceno researches and develops advanced materials technology that relies heavily on research utilizing rare earth elements. The Buffalo based company used to pay $200 per kg of Gadolinium and now pays $600 per kg. This is three times the price for an essential ingredient to Ceno’s production process.

 

The trade restrictions by China, which controls about 97% of the earth’s rare elements market, have led to higher production costs for items like batteries, magnets, electric cars, and wind turbines. Rare earth elements are also critical to military weapons systems, laser-guided weapons, and night vision goggles, leading these restrictions to pose a serious threat to national security.

 

For years, the Chinese government has slowly tightened rare earth element export quotas, but has recently taken these unfair trade practices to the next level, with a 72% reduction in the export quota level for the second half of 2010. Then beginning earlier this month, the Chinese government cut the quota limit an additional 35% for the first half of the year. According to a GAO report, the Chinese government has also increased export taxes on rare earth elements by 15% to 25%. The combination of strict export restraints combined with skyrocketing taxes on the limited rare minerals that are exported has resulted in a cheap and steady flow of rare earth elements to Chinese manufacturers, and a scarce and expensive supply to the rest of the world.  

 

The drastic changes in Chinese export policy have caused serious uncertainty among producers who use rare earth elements in their products. Previously, prices for these metals would have changed every month or two, whereas some producers are now being notified daily that prices have changed or that the minerals they need will be unavailable for a given amount of time. This seriously hampers their ability to plan for the future.

 

China’s trade practices also pose a threat to national security. According to the Department of Defense, difficulty in obtaining cerium has already caused production delays with weapons systems. Several branches of the military, a defense contractor, and departments across the federal government have begun to review their rare earth metals acquisition process, recognizing the possible perils of depending on a Chinese-dominated market full of unfair policies. Rare earth elements from China are essential to a wide range of commercial and military products including batteries, wind turbines, smart phones, hybrid cars, magnets, laser-guided bombs and munitions, and night-vision goggles. The reduction in export quotas has resulted in huge spikes in the cost of production for companies in Upstate New York that produce high precision lenses, magnets, and other products.

 

“President Obama should look President Hu in the eye and demand that he relax these quotas, lower the export taxes on rare earth minerals, and play by fair trade rules,” Schumer continued. “Upstate New York businesses like Ceno Technologies depend on these rare earth elements, and it is absolutely essential that they be made available at fair market prices.”


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