Strength Continues, As S&P 500 Tags New 2-Year Highs

Worse rare earth shortages 'yet to come' January 26, 2011 (Source: Japan Times) -- Trade statistics have revealed the country's import of rare earth minerals from China surged by more than 50 percent in the January-November period last year from the same period in 2009 — even though it plunged by two-thirds in the October-November period due to export restrictions by Beijing. China suspended exports in September, only to resume them a few weeks later. Although there has been no news that production of smart phones and hybrid cars has been stalled because of a shortage of rare earth metals, Japanese trading houses and firms are trying to reduce their reliance on China. And some metal traders say the worst is yet to come. Shortages will begin hitting early this year because Japanese firms and trading houses will run out of inventories, which are typically worth about three months, while China will cut exports, said Katsuyuki Matsuo, president of trading company Kanmaterial Corp., adding that Beijing has also raised tariffs on rare earths, another blow. "Japanese makers will realize prices (of rare earth metals) have gone up and they may be reluctant to buy." Matsuo said. "But if Japanese trading houses hesitate, companies in other countries will take what should be left for Japanese manufacturers." Major trading house Sojitz Corp. estimates domestic demand for rare earth metals, rising by about 10 percent annually, will be 32,000 tons this year. However, Japan will be able to procure only about 20,000 tons, of which 15,000 tons will come from China, spokesman Yoshihide Toh said. The rest will come from other countries and from recycling domestically used metals. Sojitz's estimate for this year is lower than last year's results due to the decrease in imports from China, which must first meet its own surging demand. Japan imported 23,654 tons of raw rare earth metals and rare earth metal compounds, of which 19,230 tons were from China, in the January-November period, according to the Finance Ministry's trade statistics. Imports from China rose 56 percent, from 12,320 tons a year earlier. For October and November, 1,912 tons of raw rare earth metals and rare earth metal compounds were imported from China, down by about two-thirds from the 5,106 tons in those months in 2009, according to Finance Ministry statistics. Domestic measures to hedge bets, including partnering with producer countries other than China — which controls 97 percent of global production of the metals and accounts for about 90 percent of Japan's imports — and developing technology requiring fewer rare earth metals, are misguided, Matsuo said. Instead, companies should tie up with Chinese companies to secure supply, he said. "China continues to be the key player, and Japanese should learn to get along with Chinese," Matsuo said. His firm, Kanmaterial, is the only Japanese company that is among foreign advisers of the China Economic Cooperation Center, an organization under the Chinese Communist Party, he said. Japanese companies should import rare earth metal compounds because China cut their export quota only for raw rare earth metals, he said. That means Japanese firms will have to find trustworthy partners in China with which to form joint ventures in order to export custom-made rare earth products, Matsuo said. But Japanese companies have been resistant because of a lack of trust in Chinese firms, he said. "German companies and other foreign companies form joint ventures. But Japanese don't want to do it," he said. Shin-Etsu Chemical Co. procures raw rare earth metals from China, processes them at its plants in Japan, and sells the processed products to makers of hybrid vehicle engines, hard-disk drives and other electronics. While the company also imports "a certain amount of" processed rare earths from Chinese companies and raw rare earths from other countries, it "currently has no plan" to set up a joint venture with Chinese makers to process them, spokesman Tetsuya Koishikawa said. China earlier this month announced it had cut its export quota of raw rare earth minerals by 35 percent to 14,400 tons in the first half of this year, from about 22,000 tons a year ago. The quota for the second half of last year was only 8,000 tons. How much of the quota will be sold to Japan depends on negotiations between Chinese exporters — Chinese companies and joint ventures with foreign companies that are given quotas by the Chinese government — and foreign and Japanese importers. In late September, China suspended the export of raw rare earth metals when Sino-Japanese relations soured over arrest of a Chinese fishing boat skipper after his trawler collided with Japan Coast Guard ships in September near the Senkaku Islands. The move prompted Japanese trading houses and manufacturers to look for alternative sources of the minerals. Posted by Asher Berube at 09:30:13 AM in Media Reblog Comments robert olson said... China wants the intellectual property of Japan. Will Japan be bullied? Ask the Germans how good their intellectual property has been protected while partnering with China in the train and car industries? Japan in the short term needs to play nice with the Chinese. Until viable alternative Non Chinese Rare Earth suppliers emerge in the next year or two. And don't forget even after Lynas, Molycorp, Alkane, Arafura, Great Western, Avalon and Dong Pao Vietnam are all producing, there is still critical REE shortages for the next 15 years, according to the recently released US DOE Critical Materials Stategy. See Link. According to the USA Department of Energy in any case scenario there shall be critical Rare Earth shortages for the next 15 years. Particularly critical for Dy Tb Y Nd Eu. Page 72 identifies only 7 Non Chinese companies in Rare Earth Production by 2015: Alkane Lynas and Arafura in Australia, Great Western and Avalon in Canada, Molycorp in the USA and Dong Pao in Vietnam. See USA Department of Energy summary and full reports, and Center for Strategic and International Studies (CSIS) video presentation links: http://www.energy.gov/news/documents/Critical_Materials_Summary.pdf http://www.energy.gov/news/documents/criticalmaterialsstrategy.pdf http://csis.org/multimedia/video-rare-earth-elements-keynote