The export tariffs of rare earths will officially be abolished in May. Last week, on April 23, China’s Ministry of Finance (MOF) issued the “Notice of the Customs Tariff Commission”. The intent of this document is to officially end rare earth export tariffs to comply with the World Trade Organization (WTO) ruling last year. In response to the rare earth case brought by the U.S., European Union and Japan against China, the Chinese Ministry posted on their website that “Upon the approval by the State Council, with effect from May 1th, 2015, the export tariffs of several products, including Iron and steel granules and powders; rare earth; tungsten and molybdenum shall be abolished; the zero-rated provisional export tariffs on wrought aluminum products.”

Amid the pressure from the WTO decision, China ended an export quotas system for limiting exports of rare earth, as well as tungsten, molybdenum and fluorspar at the beginning of the year. This said, and for those of you following the technology metals sector — Beijing countered with a “strict export license” to maintain its control over the country’s rare earths exports. So while the Chinese have removed the quota system, the replacement of a strict export license has basically created a replacement that allows little to no impact on Chinese rare earth exports over the past three months.

On the other hand, the abolishment of Chinese rare earth export tariffs, will have significant implications for the world’s rare earth market. This is because the Chinese rare earth export tax rates currently range from 15-25%: 15% for LREE (light rare earth elements) and 25% for HREE (heavy rare earth elements). In ending the rare earth export tariffs, Beijing has countered with implementing further reforms by placing a rare earth resource tax on domestic rare earth products.

“The new Chinese rare earth resource tax reform has led to a lot of market speculation that has resulted in a sharp rise in rare earth prices and resulted in the expansion of the black market”, said Chen Jiazuo, a rare earths metals research analyst at Beijing Antaike Information Development Company.

Some industry insiders predict that the new rare earth resource tax will be implemented at the start of next month in order to replace the removal of the rare earth export tariffs. The government is considering the levying the rare earth resource tax based on the price of rare earths versus volume. The end result is that this would increase monies collected substantially simultaneously pushing rare earth prices sharply higher in the domestic market.

In fact, the influence of the abolishment of rare earth export tariffs, is now increasing the speed in which the country’s consolidation of all miners and processors under the six large rare earths groups is occurring while tightening the controls of the global rare earth market by Beijing. Meanwhile, the move which also has forced some Chinese smelters to looking for suitable rare earth resources in overseas regions for upstream resources business objectives in order to realize vertical integration for its long-term stable development, has increased.

Finally, Beijing’s announcement to end rare earth export tariffs in May has resulted in a sharp rise in the prices of related rare earth shares in China’s stock market. Last week Chinese investors were wildly bullish on rare earth prices, and many believe that these prices will increase sharply when the government deploys the new rare earth resource tax.�