Rare Earths Deal Between Japan / Australia Firms

By: EW News Desk Team   Date: 16 December 2010

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16 December 2010

A top Japanese trading company has announced a deal to reduce reliance on Beijing for high-tech-vital rare earth mineral supplies. 

The Tokyo-based firm, Sojitz, said it had signed a $250 million procurement deal with an Australian mining company 

and warned that the outlook for stable shipments from the Chinese mainland remained far from certain.

The deal is the latest effort by Japan to diversify its sources of the minerals, known as rare earths, which are vital to the production of a wide range of high-technology products.

Sojitz, the top Japanese trader in rare earths, said it had forged a deal with the Australian mining company Lynas 

to start shipping 3,000 tons a year of the minerals from a new mine, Mount Weld, beginning late next year. 

Sojitz and Lynas, based in Sydney, aim to increase shipments to more than 9,000 tons a year by early 2013, 

Satoshi Mizui, a senior vice president at Sojitz, said in Tokyo.

“Of the various rare earth development projects around the world, Mount Weld has the potential to be first to begin operations,” Mr. Mizui said. 

“With this deal, we aim to secure a stable supply of rare earths to Japan.”

Sojitz will invest as much as $250 million in Lynas, which is preparing to open the Mount Weld mine in the state of Western Australia, Mr. Mizui said.

The investment will be used by Lynas to expand capacity at Mount Weld, and Sojitz may acquire a direct stake in the mine in the future, he said.

China now produces 95 percent of the world’s rare earths, and half of its exports of the minerals go to Japan — about 25,000 tons a year. 

But for two months beginning in mid-September, Beijing blocked Japan-bound shipments of the minerals 

after a dispute over islands controlled by Japan but claimed by China.

In the dispute, Japanese Coast Guard vessels intercepted a Chinese trawler and detained its captain off the disputed islands, which is between the two countries. 

Japan released the captain two weeks later, after heated protests from Beijing.

Beijing resumed exports of rare earths to Japan in mid-November, 

with customs agents not only processing the paperwork for shipments 

but also allowing dockworkers to load containers of the minerals onto ships bound for Japan.

Still, the halt has raised worries about an overdependence on China 

for products that are crucial for some of the most important Japanese industries, 

including automobiles, flat-screen televisions, computers and smartphones, as well as oil refining and wind turbines.

Some industry executives also worry that China may further cut its quotas for rare earths 

as Beijing seeks to save deposits for its own fast-growing industries. 

China is also clamping down on a black market in rare earth production and supply that has sprung up in response to growing global demand.

Beijing cut its export quotas for rare earths 40 percent this year, to 30,300 tons. 

No more than 4,000 tons of that quota remains unfilled this year, 

which means shipments could stop again soon and not resume until quotas have been issued for 2011.

Executives at Sojitz said that despite the resumption in exports from China, the company felt the need to forge links with other suppliers. 

Hiroshi Katano, manager of the section overseeing rare earths trading at Sojitz, said that the export resumption had been slow and tentative. 

“The outlook for stable rare earth supplies from China remains uncertain,” Mr. Katano said. 

“We still feel it is imperative to develop other sources.”

Japan has taken other steps to diversify its supply of rare earths, 

including courting resource-rich countries like Australia, Mongolia and Vietnam. 

Japan has also invested in technologies to recycle rare earths.

Another big rare earth mine, run by the American company Molycorp, is scheduled to reopen in Mountain Pass, Calif., after a decade-long suspension of operations.

To finance its investment in Lynas, Sojitz said it was requesting financial support from the state-run Japan Oil, Gas and Metals National Corporation, 

which has led a push by Japanese companies to secure vital resources overseas.

Lynas has signed several other supply contracts with manufacturers, 

including a deal with an unidentified European customer announced this month, 

according to this article from the New York Times.

In 2009, the Australian government blocked an effort by a Chinese government-owned company to buy a majority stake in the company, on security grounds.


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