Industry Bulletin: China Bans REE Exports to Japan?
September 23, 2010
There are several news articles in circulation regarding the rumoured ban by China on Rare Earth exports to Japan. The first article, published yesterday by Industrial Minerals Information Ltd "IM" (www.indmin.com), "broke the story" and appears to have generated considerable additional media coverage including stories in the New York Times and on the Bloomberg news service.
The Bloomberg news story, reproduced below, outlines China's response denying what government officials insist are only rumours. Regardless of whether the rumours are true, the story highlights the risks associated with reliance on a sole source of supply for any strategic commodity, which the REE have certainly become.
1. China bans Japan RE exports - 22 September 2010
by Simon Moores
Ban on rare earths exports in reaction to vessel capture, Japan traders confirm
China has imposed a total ban on rare earth exports to Japan as fallout from an incident involving a collision of fishing vessels reached an industrial level, according to one of the country's biggest buyers of the minerals.
Rare earth oxide users in Japan have spoken of serious concern as its primary supplier cut all supply ties.
"The [rare earths ban] rumour is true. I thought this problem would be solved soon, but frankly we are worried," a leading Japanese rare earths trader told IM.
For the whole story click: http://www.indmin.com/Article/2675767/China-bans-Japan-RE-exports.html
Subsequently, Bloomberg (www.bloomberg.com) released the following news article this morning.
2. China Denies Japan Rare-Earth Ban Amid Diplomatic Row
By Bloomberg News - Sep 23, 2010 4:39 AM CT
China denied reports it banned the export of rare earths to Japan in retaliation for the detention of a Chinese fishing boat captain, threatening supplies of a raw material vital to hybrid cars, laptops and iPhones.
"China does not have a trade embargo on rare earth exports to Japan," Ministry of Foreign Trade and Economics Co-operation spokesman Chen Rongkai said in a telephone interview today. Industrial Minerals Co. of Australia, an industry publication and consultancy, first reported the ban yesterday, citing an unidentified "leading Japanese rare earth buyer."
"The Chinese government has requested exporters to demonstrate support for the Chinese situation and suspend exports of rare earths to Japan until the end of the month when the situation will be reviewed," said Industrial Minerals owner and former mining executive Dudley Kingsnorth. "It's very regrettable if we have the effective suspension of commercial contracts for political reasons."
True or false, the reports may fuel concerns over China's control of more than 95 percent of the global supply of rare earths. The U.S. Department of Defense is this month due to complete a review of its dependency on the minerals for missile guidance systems, smart bombs and satellites.
Japan and China are both on national holidays today.
China cut export quotas for the minerals by 72 percent for the second half of this year, citing a shortage of supply for domestic manufacturers. The accusations of further restrictions to Japan come as Asia's two biggest economies are embroiled in a diplomatic row over the Sept. 7 detention of the skipper in waters around a group of uninhabited islets and outcrops about 200 miles (322 kilometers) off the northeast coast of Taiwan.
Chinese Premier Wen Jiabao this week demanded Japan "immediately and unconditionally" release the skipper or face retaliatory action. Japan has refused to let him go, saying that the case is being handled in the country's court system.
China said this week it had severed senior-level government contacts after Japanese prosecutors extended the captain's detention until Sept. 29. Japan's foreign ministry on Sept. 20 said China had revoked an invitation for 1,000 youths to attend the Shanghai World Expo, and ticket sales for two concerts in the city by pop band SMAP were suspended, Asahi newspaper reported.
Kingsnorth, who managed the Mount Weld rare earths project for Ashton Mining of Canada Inc. for 10 years and has worked for BHP Billiton Ltd., Rio Tinto Group and Alcoa Inc., said China's actions to restrict trade in rare earths would only spur buyers to develop alternative supplies.
Rare earths are a group of chemically similar metallic elements, including lanthanum, cerium, neodymium and europium. They are used in radar, high-powered magnets, mini hard-drives in laptop computers, catalytic converters for vehicles, electric-car batteries and wind turbines. Many are difficult to substitute with alternatives.
While relatively abundant in the earth's crust, finding deposits of rare earths significant enough to mine is less common, the U.S. Geological Survey says. China, the countries that made up the former Soviet Union and the U.S. have the largest reserves.
China's shipments will be capped at 7,976 metric tons, down from 28,417 tons for the same period a year ago, according to data from the Ministry of Commerce on July 8.
Rising demand for hybrid cars and music players such as Toyota Motor Corp.'s Prius and Apple Inc.'s iPod have already driven up demand and prices for rare earths, even without China's export restrictions.
"Toyota has a stockpile of the rare earths and minerals used in hybrid cars and electrics parts, so an embargo is unlikely to affect its production anytime soon," said Koji Endo, an auto analyst at Advanced Research Japan in Tokyo. "If China keeps an embargo on sales for more than a year, Toyota might not be able to produce hybrids." Still, any disruption to trade may drive prices of the raw material higher, damaging profit, he said.
The cuts in quotas have already driven prices "up by anything between 50 and 400 percent," Kingsnorth said.
Shares of Lynas Corp., the Sydney-based company that's developing a rare earth mine in Australia, have more than doubled this year. The stock gained 3.8 percent today to A$1.235. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co., the biggest Chinese producer, has also more than doubled this year and closed at 64.44 yuan in Shanghai on Sept. 21.
Lynas plans to bring its Mount Weld project in Western Australia and processing plant in Malaysia into production by the third quarter next year. The refinery would be the first outside of China "in about 50 years," Executive Chairman Nicholas Curtis said in an interview last week.
A rare-earth mine in the U.S., in Mountain Pass, California, that was once the world's dominant producer, shut down most operations in 2002. Molycorp Inc., which owns the mine, plans to reopen it this year.
The U.S. military depends on China for the metals required to build smart bombs, night-vision goggles and naval radar, according to a report to Congress obtained by Bloomberg News in April.
China's hold on global production gives it "market power" against the U.S., the Government Accountability Office said in the report. The materials are found in weapons including General Dynamics Corp.'s M1A2 Abrams tank and Aegis SPY-1 radar made by Lockheed Martin Corp.
Liza Lin in Shanghai, Jason Scott in Perth and Maki Shiraki in Tokyo. Editors: Ben Richardson, Mark Williams.
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