WIREDGOV

The European Union launched yesterday a third case against China's restrictions on export of raw materials essential for European industries.

Following the successful legal actions in 2012 and 2014 on similar measures, this time the EU is focusing on restrictions concerning graphite, cobalt, copper, lead, chromium, magnesia, talcum, tantalum, tin, antimony and indium.

"We cannot sit on our hands seeing our producers and consumers being hit by unfair trading practices. The past two WTO rulings on Chinese export restrictions have been crystal clear - these measures are against international trade rules. As we do not see China advancing to remove them all, we must take legal action," said EU Trade Commissioner Cecilia Malmström.

China currently imposes a set of export restrictions, including export duties and export quotas that limit access to these products for companies outside China. These measures have distorted the market and favoured Chinese industry at the expense of companies and consumers in the EU, in violation of general WTO rules and also of China's specific commitments from the time of its accession to the WTO. Also, their alleged aim to support an environmentally friendly and sustainable production of raw materials could be achieved more effectively with other measures, without negative impact on trade.

The formal consultations between the EU and China – the first step in the WTO dispute settlement - will be conducted in parallel to a similar procedure initiated by the US. In absence of a satisfactory solution within 60 days, the EU may request the WTO to set up a panel to rule on the compatibility of China's measures with WTO rules.

Background

Raw materials subject to the case include graphite, cobalt, copper, lead, chromium, magnesia, talcum, tantalum, tin, antimony andindium. Some of them (in bold) are among the twenty raw materials identified in 2013 as critical to Europe’s economy and essential to maintaining and improving our quality of life.

China’s total exports of these products are worth around €1.2 billion, one sixth of which comes into Europe. A first analysis suggests that removing the export duties imposed by China could allow an additional supply of these raw materials to the EU economy worth around €19 million, i.e. an increase of 9.2%. However, the real increase of China’s supplies to the EU is likely to be much higher if the other instruments that China is currently using to restrict its exports were also removed.

Types of restrictions

China applies export duties to various forms of antimony, chromium, cobalt, copper, graphite, lead, magnesite, magnesia, talc, tantalum, and tin. Quantitative restrictions, such as export quotas, are applied to antimony, indium, magnesia, talc, and tin.

Raw materials concerned

Graphite

Graphite is one of three pure forms of carbon and is used in a wide range of industry applications, in particular in refractory materials as well for lubricants, steelmaking, metal casting and brake linings.

China is the world’s dominant producer accounting for two thirds of world supply. EU is dependent on imports for 95% of its consumption. Approximately half of EU imports of graphite come from China.

Cobalt

Cobalt is used in chemical compounds for a wide range of industrial applications. Rechargeable batteries consume the largest proportion of cobalt. The demand for cobalt is expected to increase due to the emerging use of cobalt in some rechargeable batteries for electric vehicle applications and biotech applications.

Cobalt is mainly produced as a by-product from copper and nickel. Half of the mine production is done in DRC and there is hardly any production in the EU. China has limited reserves and mine production of cobalt but has secured many life-of-mine or long-term contracts with third countries' mine operators that allow it to be the world’s leading producer of refined cobalt.

Copper

Copper is the best electrical conductor after silver and is used in the production of energy-efficient power circuits. As it is also corrosion resistant, ductile and malleable, its main application is in all types of wiring; from electric energy supply from the power plant to the wall socket, through motor windings for electrical motors, to connectors in computers.

While the vast majority of copper reserves are found in the Americas (Chile, USA, Peru and Mexico), there is some production in the EU, mainly in Poland. Two thirds of EU imports come from Latin American countries. In turn China accounts for approximately 10% of world mined production of copper which is mainly used for domestic consumption.

Lead

The lead-acid battery industry is the main sector using lead. Other applications include ammunition, glass, heat stabilizer in plastics and resins, metal finishing, electronics, sheet, bulk metal, and pigments.

China accounts for about half of the world's mine production of lead. Lead is also mined in the EU, mainly in Poland, Sweden, Greece and Bulgaria. Russia is the EU main source of imports.

Chromium

Chromium finds its main applications in the steel industry, in particular for the production of stainless steel production. South Africa is the main world producer of mined chromium and shares with Kazakhstan the largest global reserves. South Africa is also by far the main source of EU imports, with some quantities imported from Turkey. As the largest global stainless steel producer, China is the leading chromium-consuming and ferrochromium-producing country.

Magnesia including magnesite

Magnesite is mainly used in the production of magnesia, in the form of caustic calcined magnesite, dead burned magnesite and fused magnesia. Dead burned magnesite and fused magnesia are predominantly used in the refractory industry; caustic calcined magnesite is mostly used in chemical-based applications such as fertilisers and livestock feed, pulp and paper, iron and steel making, hydrometallurgy and waste water treatment.

China holds 70% of the global mined production of magnesite. There is some production of magnesite in the EU (Spain, Slovakia, Austria and Greece). The EU is nevertheless import dependent for magnesia, imported mainly from China and Turkey.

Talcum

In Europe, the largest applications of talc are plastics and paints consuming together about 50% of the total talc consumption. Further end-uses are represented by paper, agricultural applications, and the manufacturing of ceramics, rubber, food, cosmetics and pharmaceuticals.

China is the largest global producer of talc with about 30% of the world production. There is some significant production in the EU as well, covering about 80% of the EU domestic consumption. Imports into the EU mainly come from Pakistan and China.

Tantalum

Tantalum is used in the production of electrical components (including those used in mobile phones, computers, videogame consoles), aircraft engines and surgical components.

Rwanda, the Democratic Republic of Congo and Brazil were the leading producers for tantalum worldwide in 2015. China, while not a major tantalum producer, imposes an export duty on tantalum waste and scrap, which is the measure subject of this case.  

Tin

Tin main application is in alloys of tin and lead used as solders for electric circuits found in the majority of electronic appliances. Tin is also used in the packaging industry as well as in chemical applications.

Mining in five countries (China, Indonesia, Burma, Peru and Bolivia) accounts for 80% of the total world tin production. Of these five, China is the world’s leading tin producer, with 37% of world production and the world's main tin ores importer. There is hardly any tin production in the EU, except for limited quantity in Portugal.

Antimony

Most antimony is used in form of antimony trioxide, mainly for flame-retardants for plastics and other products. Especially modern aircraft industry uses antimony trioxide as a fire retardant. Other applications include batteries, plastics, glass, semiconductors and alloys.

Antimony is mined in 15 countries, but mine production is concentrated very heavily in China (78% of the world total). There is no current mining of antimony in the EU. Turkey and Bolivia are the main EU sources of imported antimony ores.

Indium

The major use of indium is as indium-tin oxide in flat panel devices including flat screen computer monitors, LCD smart phones, televisions and notebooks. Other applications are in alloys and solders, solar panels, light emitting diodes and laser diodes.

Indium is a by-product of other mining and refining operations, mainly of zinc as well as lead, copper and tin minerals. China accounts for half of refined indium production. While production takes place in some EU Member States (Belgium, Germany, Italy, the Netherlands and the UK), the EU is also a net importer.

Further information

WTO dispute settlement in a nutshell

China — Measures Related to the Exportation of Various Raw Materials

China — Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum

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• Axel FOUGNER (+32 2 295 72 76)

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