Chinese officials are signaling plans to further reduce rare-earth exports next year, sustaining its controls of the metals-- key ingredients in high-technology batteries and defense products--that have already severely frustrated foreign governments.

"Reducing the export quotas is under consideration, but it's too early to talk about any reduction rate," Lin Donglu, secretary general of the Chinese Society of Rare Earths, told Dow Jones Newswires on Tuesday. The state-run English-language China Daily on Tuesday quoted an unnamed Commerce Ministry official suggesting that cuts of as much as 30% 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 Tuesday.

Speaking at a conference on rare-earth elements in southeastern China on Tuesday, 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 Ltd., host of the conference.

(This story and related background material will be available on The Wall Street Journal website, WSJ.com.)

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% of world supply, said its limits--which this year aim to cut exports around 40% 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 defense 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 Tuesday 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."

In an interview Tuesday, a local official in one of China 's rare-earth processing regions said a cut in China 's output toward 100,000 metric tons in 2011 from about 120,000 tons 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, defense 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. Inc. (MCP) Chief Executive Mark A. Smith told Tuesday'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 , Calif. , mine--once the world's largest rare-earth producer--will begin next year, Smith said, with output of 20,000 metric tons of rare-earth oxides expected by the end of 2012. A further increase to 40,000 tons would take as much as another 18 months and cost as much as $200 million, 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, high-tech, defense and pollution-control sectors," Smith said.

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