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    Japan
     Apr 28, 2011


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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. 

Continued 1 2  

 


1. Thailand, Cambodia edge toward war

2. The great Afghan carve-up

3. AfPak comes to Africa

4. S&P starts the process

5. Iran banks on East to evade sanctions

6. A cross-strait tale of betrayal

7. Critical theory

8. Syrian military strikes at rebels' heartland

9. China yearns for peace on southern flank

10. Sleepwalking into the imperial dark

(24 hours to 11:59pm ET, Apr 26, 2011)

 
 



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