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2 Japan
spreads rare earth risk By
Cindy Hurst
Japan has been dealt a number
of blows over the past few years which have put
the country's high-tech production capacity at
risk. Most recently, the massive earthquake and
subsequent tsunami that hit Japan in March has
directly affected production efforts through
rolling blackouts and damaged equipment.
Another issue, and one that has been
missed by public scrutiny, is the country's
struggle to obtain steady supplies of certain key
materials needed to produce its high-tech
products. Some of those key ingredients are rare
earth elements (REEs), of which China has been
cutting back export quotas. China has also
reportedly announced that it was going to create a
REE strategic reserve, a measure that some
analysts feel will give the country more control
over the industry. In an industry that is ever
changing, other countries,
whose economies and national security depend on
technologies produced with REEs, could learn by
Japan's example.
While REEs have long been
in the cross-hair of industry analysts, the issue
of REE production and supply increased its public
spotlight in 2010 after a territorial dispute
between China and Japan over the Senkaku/Diaoyou
islands during which China imposed a de facto ban
on all rare earth exports to Japan. The ban,
according to Japanese Economy, Trade, and Industry
Minister Akihiro Ohata, further reinforced the
idea that the country needed "to craft a long-term
strategy to procure rare earths".
China
first began cutting back export quotas for REEs in
2006. Japan began to take action to reduce its
reliance on its neighbor by early 2007. Dudley
Kingsnorth, executive director of the rare earth
consulting company Industrial Minerals Company of
Australia (IMCOA), is forecasting global demand to
increase from 124,000 tonnes annually in 2010 to
250,000-300,000 tonnes by 2020. Of this amount, he
expects 110,000 to 130,000 tonnes to account for
the rest of world (ROW) demand [1]. In what could
be deemed a race for rare earth elements, Japan
has already been placing itself at an advantage by
taking early action.
REEs are the 15
elements that comprise the family of lanthanides
on the periodic table, plus yttrium and scandium.
These metals are vital to the production of
hundreds of modern technologies such as cell
phones, iPods, computer hard drives, green
technologies, and critical military weapons
systems.
China dominates the industry,
producing over 95% of the world's REEs, but the
country has been steadily cutting back export
quotas, causing worldwide concern [2]. These cuts
are a result of several factors including China's
desire to stomp out illegal activity, consolidate
the industry and stockpile the metals. These cuts,
while seemingly necessary for China, enslave
nations to the whims of the country's production
quotas.
Japan has been seeking to come up
with alternatives over the past five years. While
Japan's consumption of REEs has been increasing
somewhat steadily over the past three decades,
imports from China continue to go down. In
December, imports were at 4,080 tonnes after trade
resumed following China's de facto ban on
shipments. In January, Japan imported 1,783 tonnes
from China. In February, that number dropped to
1,138 tonnes. In 1995, the country consumed 7,654
tonnes. In 2000, that figure rose to 13,690
tonnes. In 2005, Japan consumed 18,855 tonnes.
Prior to the earthquake and subsequent
tsunami that occurred in March, Sojitz
Corporation, a Tokyo-based trading company and one
of Japan's largest rare earth importers estimated
that Japan would use 32,000 tonnes of rare earths
in 2011 [3]. Experts estimate that in the near
term, Japan's consumption rate will decrease as
the country struggles to regain its footing in the
production of high tech products and that the
country's consumption rate in 2011 will be less
than originally forecasted.
The problem is
that Japan does not possess any REEs of its own,
forcing the country to rely wholly on imports,
approximately 90% of which come from China.
Therefore, because of its already tight supplies,
Japan will likely continue to seek alternatives
outside of China.
History of Japan's
rare earth industry Japan used REEs as
early as the 1940s when the country first saw
their value as polishing agents and began
producing lighter flints. By the 1960s, research,
development and the use of REEs in the country
expanded. By 1973, Japan began producing samarium
cobalt (SmCo) magnets. Two years later, Sony was
using these magnets in its Walkman radios. In
1982, the Rare Earth Study Association was
established. The name of the organization changed
to The Rare Earth Society of Japan in 1995. In
1985, Japan began producing neodymium iron boron
magnets (NdFeB), which are the strongest magnets
available on the market today and make
miniaturization possible [4].
Over the
past two decades, Japan transferred some of its
production bases to China, a strategic move to
help Japan ensure future supplies. Today, however,
due to China's steady export cuts and proven
ability to use its rare earth resources as a
political bargaining chip, Japan no longer feels
comfortable relying on China. As a result, Japan
has been seeking a more diverse supply by creating
joint ventures and signing supply agreements with
countries having known reserves of REEs. In
addition, Japan has been pursuing other options,
including recycling, and developing alternative
materials that will lessen the country's
dependence on REEs.
Diversifying
supply The global demand for Japanese
products is what drives Japan's demand for REEs.
For example, Japan is a major producer and
exporter of sintered rare earth magnets and NdFeB
alloys, nickel-metal hydride batteries, auto
catalysts, digital cameras, fluorescent lamps, and
others. The country is also the largest global
producer of hybrid electric vehicles (HEV).
HEVs rely heavily on REEs. According to
IHS Automotive, an organization that provides
automotive market forecasting services and
strategic advisory solutions to automotive
manufacturers, suppliers, and financial
organizations, the rate of production of Japanese
HEVs has increased steadily over the past decade.
In 2007, Japan produced 443,253 units. By 2010,
that number nearly doubled to approximately
883,000 [5]. According to some estimates, HEVs
contain up to 25 pounds (11.3 kilograms) of REEs.
For example, NdFeB magnets are used in electric
motors because of their high efficiency and light
weight. Lanthanum and cerium are used in the
hybrid NiMH batteries [6].
The increase in
demand for HEVs, coupled with China's cuts in rare
earth quotas, has prompted Japanese companies,
such as Toyota Motor Corporation, to seek REEs
elsewhere outside of China to ensure production is
not affected.
Beijing began cutting export
quotas for REEs in 2006. By early 2007, Hiroshi
Okuda, a senior advisor to Toyota Motor, was
concerned enough to organize a forum on natural
resources and diplomacy. In March 2007, Okuda
began asking the question: "Is there a way we
could purchase an entire mine?" [7]. Soon after,
Toyota Tsusho Corporation, Toyota's trading house,
set out to find alternative sources of rare earths
by dispatching teams to Canada, Australia, and
Vietnam [8]. Other Japanese companies soon
followed suit.
In 2008, Toyota Tsusho and
Sojitz established a joint venture with Coal and
Mineral Industries Group (Vinacomin), a Vietnamese
state-run company. In exchange for financial and
technical support, Japan acquired the right to
mine REEs at the Dong Pao mine in Lai Chau
province, Vietnam. Mining operations could begin
in Dong Pao as early as 2011 [9]. Sumitomo
Corporation, Japan's third-largest trading
company, recently launched a feasibility study on
a mine in Yen Bai, in northern Vietnam. They are
expected to start exporting rare earths to Japan
as early as 2013.
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