CHINESE officials are hinting at plans to further reduce exports...

CHINESE officials are hinting at plans to further reduce exports of rare-earth metals, a key resource to the world's hi-tech sector.

Existing restrictions on China?s export of rare earth resources - key ingredients in the manufacture of top-end batteries and military armaments - have already severely frustrated foreign governments.

?Reducing the export quotas is under consideration, but it's too early to talk about any reduction rate,? according to Lin Donglu, secretary-general of the Chinese Society of Rare Earths, who spoke with Dow Jones Newswires overnight.

The state-run English-language China Daily quoted an unnamed Commerce Ministry official suggesting that cuts of as much as 30 per cent from already-trimmed 2010 levels are possible. A Commerce Ministry official declined to confirm the report and the Ministry didn't reply to faxed questions yesterday.

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Speaking at a conference on rare-earth elements in south-eastern China yesterday, Chinese officials, including a Commerce Ministry deputy director, Jiang Fan, highlighted their concern about aggressive development of the country's resources, attendees said. One official there suggested China, by far the world's largest producer and consumer, could even become an importer.

?Their main thrust was, China needs to work to protect its rare-earth industry,? said Nigel Tunna, managing director of Metals Pages, host of the conference.

China's decision in recent months to impose tougher quotas on rare-earth metal exports has sparked outcry from Tokyo to Washington.

China, which uses around half of its output of the elements and produces around 97 per cent of world supply, says its limits - which this year aim to cut exports around 40 per cent from 2009 - reflect its growing environmental awareness, are perfectly legal and won't be used as a policy tool.

Yet, foreign importers worry reductions are designed to lift their metals? import costs, undermine their high-technology industries and unnerve their defence departments. The metals, 17 chemically similar and expensive-to-mine elements, are critical to the manufacture of products from iPhones to smart bombs.

Asked at a news conference yesterday whether limits have been imposed on export of rare-earth metals to Japan - the world's biggest importer and recently embroiled in a diplomatic spat with Beijing - Ministry of Foreign Affairs spokeswoman Ma Zhaoxu sidestepped the question, saying the government rare-earth controls are ?not only for China's development, but for the world's development?.

A local official in one of China's rare-earth processing regions yesterday said a cut in China's output toward 100,000 metric tons in 2011, from about 120,000t this year, would be in line with official policy.

China dominates global production of rare earth, but it hasn't always done so. During the 1990s, the Chinese government pursued a policy to expand its industry, at a time when many Western producers were succumbing to high costs and tightening environmental controls. Deposits of the elements are found in numerous places and mining, technology, defence and investment companies are now scrambling to establish alternatives to increasingly uncertain imports from China, sparking something akin to a mini-gold rush. The activity has hastened after Beijing's latest quota was announced in July.

MolyCorp chief executive Mark A. Smith told yesterday?s conference, according to a text of his presentation, that his Colorado-based company is on track and within budget to deploy a manufacturing supply chain by the end of 2012 that includes production of nine of the ?most commercially significant? rare earths.

Fresh mining at MolyCorp's Mountain Pass mine in California - once the world's largest rare-earth producer - will begin next year, Mr Smith said, with output of 20,000 million tons of rare-earth oxides expected by the end of 2012. A further increase to 40,000t would take as much as another 18 months and cost as much as $US200m ($206m), Mr Smith said.

?There is little question that it will take many nations and many producers doing their best to increase production if we are to meet rising demand in the clean energy, hi-tech, defence and pollution-control sectors,? Mr Smith said.