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Buyers who purchase from aChina are set to benefit from lower prices and larger supplies of raw materials, after the country has been told to lift its export restrictions.

This week, the World Trade Organisation (WTO) has said that China is in breach of WTO rules after placing export quotas on the bauxite, coke, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorous and zinc they product in the country.The US, Mexico and EU have challenged China’s export duties arguing that the restrictions had created small supplies but higher prices across global markets.

For those European companies relying on these raw materials it would be a problem, (including those in the chemical, steel and non-ferrous metal industries and their customers, for example producers of electronics, cars and medicines).

In 2009 he European Union and the US (and later Mexico) launched this case against China, and the WTO has now ruled that China has to remove its restrictions. Further to the ruling, representatives of the EU, US, Mexico and China are to meet with the WTO to devise a timescale for the restrictions to be lifted.

The EU said that China’s export restrictions increase world prices and therefore “create serious disadvantages” for buyers in foreign markets who rely on the purchase of these raw materials.

Another problem is that China’s restrictions also “artificially” lower the country’s prices to their native companies, due to significant increases in supplies, this puts further pressure on foreign companies to move their operations to China for financial reasons.

The WTO stated that China had failed to give them a good reason for its the measures they undertook, and said it’s environmental protection reasons were unjustified. When China joined the WTO, it promised to eliminate all export duties.

EU trade commissioner Karel De Gucht said; “This final ruling [of the WTO] is a great success in our efforts to ensure fair access to the much needed raw materials for EU industry. It sends a clear signal that such measures cannot be used as a protectionist tool to boost domestic industry at the expense of foreign competition,"

Further to the issue surrounding raw materials, China produces about 97 per cent of the world’s 17 rare earth minerals (REEs). Its government’s drive to decrease export of these minerals and increase its own consumption is problematic, as it has created higher global REE prices. These minerals are used in energy-efficient bulbs, LCD/plasma displays, IT equipment and wind turbines. Cars use more than 1,000 parts containing rare earths. China’s export restrictions on REEs may remain unaffected by the WTO’s ruling on raw materials, but De Gucht intends to exert political pressure to remove the restrictions as the Chinese submitted similar environmental arguments for its restrictions in REEs.

Source: http://www.supplymanagement.com/news/2012/wto-rules-china-must-open-up-raw-material-exports/