China defended its export controls on rare earth minerals on Thursday, saying that they were in line with World Trade Organisation rules, after a government move to slash export quotas on rare earths sparked trade concerns.

China, which produces about 97 percent of the global supply of the metals used in the production of numerous high-tech products, cut its export quota by 35 percent for the first half of 2011 compared with a year earlier, saying it wanted to conserve reserves.

Foreign Ministry spokeswoman Jiang Yu reiterated at a regular news briefing in Beijing that the quotas were necessary for environmental protection.

"This accords with relevant WTO rules," she said. "In the future, China will continue to supply rare earths to the international market and will take effective management steps over their export in accordance with WTO rules."

The foreign ministry does not set China's policy on rare earths.

China has refused U.S. requests to end export restraints on rare earths that have alarmed trade partners, and Washington could complain to the WTO, which judges international trade disputes, the U.S. Trade Representative office said last week.

Eoin Treacy's view Interest in the rare earth metals sector has been brewing for a couple of years now (the first time an article on the subject appeared in Fullermoney was in March 2009) but the shares underperformed until the catalyst of Chinese export quotas appeared six months ago. Since then a scramble has developed to be first to process these metals outside of China.

Investors now have a better understanding of just how essential these metals are, how much of a stranglehold China has on supply and how much more of this metal is required if greener technologies are to gain a larger foothold. As a result investors are increasingly looking for opportunities to invest in the sector.

The number of companies offering access to rare earth metals is still comparatively small. Here is a reasonably comprehensive list of 20. Most of these shares rallied impressively from June and hit near-term peaks by October. They have held the majority of their advances and 13 hit at least new 3-month highs in the last few days reaffirming their medium-term uptrends. Sustained moves below their October reaction lows would now be required to question medium-term upside potential. (Also see Comment of the Day on November 26th).