* U.S. expresses concern over China’s export restraints

* Rare earth elements used in high-tech, clean energy

* U.S. expert sees two-year crunch for end users (Adds U.S. industry analyst, background)

BEIJING, Dec 28 (Reuters) - China said on Tuesday it will cut its export quotas for rare earth minerals by more than 11 percent in the first half of 2011, further shrinking supplies of metals needed to make a range of high-tech products.

China produces about 97 percent of rare earth minerals, used worldwide in high-technology, clean energy and other products that exploit their special properties for magnetism, luminescence and strength.

The rare earth issue could further strain U.S.-China ties, which have been battered this year by arguments over human rights, Tibet, Taiwan, the value of the Chinese currency and North Korean military attacks on South Korea.

Chinese President Hu Jintao is due to visit the United States next month for talks with President Barack Obama that both sides hope can stabilize the vital relationship.

Beijing says its curbs are for environmental reasons and to guarantee supplies to Chinese clean energy firms it is trying to promote internationally. But it has also said its dominance as a producer should give it more control over global prices.

China’s Commerce Ministry allotted 14,446 tonnes of quotas to 31 companies, which was 11.4 percent less than the 16,304 tonnes it allocated to 22 companies in the first half of 2010 quotas a year ago.

China slashed the export quota by 40 percent in 2010. The export restraints on rare earths has inflamed trade ties with the United States, European Union and Japan in particular.

In Washington, the U.S. Trade Representative’s office expressed concern over the latest announcement.

“We are very concerned about China’s export restraints on rare earth materials. We have raised our concerns with China and we are continuing to work closely on the issue with stakeholders,” a USTR spokeswoman said.

Last week, the trade representative’s office said China had refused U.S. requests to end export restraints on rare earths, and the United States could complain to the World Trade Organization, which judges international trade disputes. [ID:nN23157001]

TURBINES AND HYBRIDS

Wind turbines and hybrid cars are among the biggest users of rare earth minerals, which analysts say are facing a global supply crunch as demand swells. The minerals are also used in some weapons systems.

This little-known class of 17 related elements is also used for a vast array of electronic devices ranging from Apple's APPL.O iPhone to flat-screen TVs, all of which are competing for the 120,000 tonnes of annual global supply. (For factbox on how various industries use rare earth elements, click on [ID:nN28256995])

While industrial users of rare earths in industrialized countries face tighter supplies and higher prices, China’s export curbs have created opportunities to open mines or revive dormant production in Canada, Australia and the United States.

After China's announcement, shares of Molycorp Inc MCP.N, the Colorado-based company that owns a rare earth mine in California, rose as much as 11.6 percent.

But the headline-driven surge in a firm whose value has tripled since July proved only temporary, in part reflecting the fact that Molycorp’s rare-earth mine in Mountain Pass, California, is due to come back online only late next year.

Canada alone has at least 26 publicly traded companies, including Great Western Minerals Group GWG.V and Rare Element Resources RES.V, that have rare earth projects in some stage of exploration.[ID: nTOE6A908I]

Jack Lifton of Technology Metals Research, a Chicago-based consultancy, said Molycorp and Australia's Lynas Corporation Ltd LYC.AX can eventually offset shortfalls from Chinese cuts in supply and refining capacity -- but not before early 2013.

“Until one of them can produce commercial quantities of high-purity rare earths on a regular basis, the market will belong to the Chinese entirely,” he said.

In a short statement on its website (www.mofcom.gov.cn), the Chinese Commerce Ministry said it had added more producer companies to the quota list but cut volumes allocated to trading companies.

CLEAN UP, CONSOLIDATION IN CHINA

Japan has been hard hit by the export curbs. Japanese imports of rare earths shrank further in November, reflecting the impact from China’s de-facto ban on shipments of the minerals that was lifted late last month. [ID:nTOE6BQ02Z]

The European Union has also expressed concern over China’s limiting of rare earth exports, though the bloc’s trade commissioner said earlier this month China had reiterated that rare earth supplies would be sustained. [ID:nTOE6BK01Q]

With more than 100 mines and some 40 refineries, “the Chinese seem to be quite serious about cleaning up the sector environmentally and consolidating it,” said Lifton.

Beijing has been trying hard to impose discipline on its chaotic rare earth sector and is expected to establish a rare earth industry association by next May, said Wang Caifeng, an official with the Ministry of Industry and Information Technology, speaking at a conference on Tuesday.

Tougher environmental regulations for the rare earth sector are also expected to be unveiled next year, the China Business News reported on Tuesday. (Reporting by Niu Shuping, David Stanway and Michael Martina in Beijing; and Roberta Rampton and Paul Eckert in Washington; Editing by Vicki Allen, Will Dunham and Todd Eastham)