China hikes rare earth taxes

China is hiking taxes on rare earth elements, the second time in recent months it has moved to slow the export of minerals that are key to the current crop of high-tech devices.

The tax bureau said Thursday taxes will rise to either 30 yuan (about $4.50 Canadian) or 60 yuan ($9) per tonne, depending on whether the elements are categorized as light or heavy. That's up from just 0.5 and 3 yuan per tonne, respectively. The new rates come into effect in April.

The movefollows Beijing's decision inDecember to slash the total amount of rare earths it will allow for export by about a third, to 30,000 tonnes a year.

Chinais believed to holdabout 30 per cent of the world'srare earth deposits, but accounts for roughly 97 per cent of current global production levels. Rare earthmetals are a collection of 17 elements that are used in everything from high-tech devices like batteries, permanent magnets, wind turbines, cellphones, electric cars, flatscreen televisions and missile guidance systems.

Despite the name, they are not all that rare some are more prevalent in the earth's crust than copper. But finding them in amounts dense enough to mine economically, near the right infrastructure, and in mining-friendly jurisdictions can be tricky.

Demand is forecast to increase by about 15 per cent per year, primarily because the elements are integral to the next generation of energy-efficient batteries and power sources. Prices have already increased by an average of 700 per cent for the metals over the past decade.

In addition to the environmental costs of mining them, it's believed China's move to limit exports is more of a political move aimed at encouraging foreign companies to set up processing facilities inside China and not simply export the ore to their plants offshore. But China's dominance is sure to erode regardless a recent report by CIBC predicts China's output will decline by 20,000 tonnes per year by 2015,andthe countrywill eventually become a net importer.