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The race for rare metals is on - A view from Japan

Demand for rare earth metals is expected to accelerate due to growing use of next generation green technologies. High performance batteries, wind power generators and many other high-tech devices use rare earth metals. Japan is the leader in a number of green technologies.

China monopolizes the supply chain for rare earth. There has been growing concern in Japan about the 800 pound panda in the room. In recent years Japanese trading companies and manufactures have been taking the initative to secure other sources of rare earth metals. The Japanese government has recognized the importance of rare metals for Japan’s industrial economy and has drawn up a strategy to secure a stable supply of rare metals.

Japan’s approach to the emerging competition for rare earth resources while haphazard until recently, is not alarmist. Japanese industry and government recognize the need for some kind of resource diplomatic strategy.

This article was published in the October 27th, 2009 edition of the Economist.

English Translation

President Obama’s New Green Deal initiative has placed greater focus on the next generation of environmentally friendly plug-in hybrid and electric vehicles.

The key to realizing this technology lies in the development of high capacity and highly efficient lithium batteries. The energy output of Toyota’s Prius nickel-metal hydride battery is low with the traveling distance of the car limited. High energy lithium batteries would improve the car’s performance. Battery makers have formed various strategic relationships with automobile companies in the battle to develop lithium batteries.

The lithium battery’s cathode contains the rare metal lithium and it is expected that demand for lithium will sore in the future. Lithium exists in only a few places. Nearly 40% is located in Bolivia. That’s 5.4 million tons of the worlds 13.4 million tons of known lithium.

Securing lithium is a critical issue for a resource poor Japan. Last June, a Japanese trade mission comprised of government affiliated organizations and the private sector which included representatives from Mitsubishi; Sumitomo; Japan Oil, Gas and Metals National Corporation (JOGMEC) and Nippon Export and Investment Insurance (NEXI) proposed to the Bolivian government to provide the technology, funds, and infrastructure to develop the world’s largest lithium deposit at the Uyuni salt pans.

Japan is not the only country whose representatives have visited Bolivia. In February, French President Sarkozy met with Bolivia’s President Morales. The giant French group Bollore which plans to manufacture electric vehicles is currently negotiating an agreement with Bolivian mining officials to secure lithium. South Korea’s Lucky Gold Star Group and BMW, which has a strong presence in South America, have taken a very active interest in Bolivia. It’s been reported that China will provide the funds to construct a school in President Morales’s home town and has proposed to supply Bolivia with military vehicles and ships. It’s expected that China will surpass Japan in the production of cars and will become the number one car maker in the world. If electric vehicles are to become the next-generation strategic export item for China, it’s absolutely essential that China secure lithium.

The Bolivian government is in the process of comparing the proposals from several governments. President Morales would like either lithium batteries or electric cars to be manufactured in Bolivia. His ultimate aim is to have manufacturing facilities and technical know-how transferred to his country.

“Bolivia is a high risk country. Even if an agreement is made, the price could suddenly be raised. We never know what they will say next,” said a major Japanese trading company executive. While he recognizes that Bolivia has vast reserves of lithium, he’s concerned about emerging resource nationalism.

Next-generation technology is impossible without rare metals. While the competition to acquire energy resources and base metals such as iron and copper continues, the race to obtain rare metal has started.

Rare metal is defined as a metal whose known reserves are in small quantities, is in high demand but is difficult to extract due to economic and technical reasons and is expected to have increased demand due to technological innovations. The Ministry of Economy, Trade and Industry’s mining commission has designated 31 types of ore as rare metals. Particularly scarce are a group of 17 elements collectively known as rare earth metals.

There are concerns in Japan over securing a stable supply of neodymium and dysprosium, two rare earth alloys that are used to make powerful permanent magnets. China controls 97% of the worlds supply of those metals.

Permanent magnets are absolutely vital in the production of renewable energy devices such as the motors for hybrid cars and electric vehicles, and turbines for wind power generators. Japan is the world leader in permanent magnet technology, however the country is extremely reliant on China’s supply of rare earth alloys.

China has been tightening restrictions on the export of rare earth alloys. Rare earth production continues to grow in China. From 2002 to 2008 production of rare earth increased by 60%, yet exports since 2003 have continued to decline. Chinese domestic consumption of rare earth is surging and it’s absolutely essential  estimated that production will approximately equal domestic consumption by 2012.

It’s clear that China’s national strategy is to “withhold resources.” In 2006 the 11th five year plan called for greater protection of rare earth, tungsten, tin and antimony and the promotion of high-tech industries that use rare earth.

In August, the world was shocked over the prospect that China would restrict rare earth exports. The Chinese agency which determines export restrictions, the Ministry of Industry and Information Technology (MIIT), denied that the export of rare earth such as dysprosium and terbium would be banned. However, this incident shows that China could restrict the export of rare earth.

In First China Business Post, China’s financial newspaper, MIIT announced that it plans to reduce the number of companies that mine rare earth from the present level of 200-300 companies to 20 companies. An executive working at major Japanese trading company pointed out that “the central government wants to strengthen its control over the industry by having about 4 conglomerates dominate the industry.”

At the end of June, the United States and the European Union jointly launched a suit against China with the World Trade Organization (WTO) claiming that world prices have increased as a result of China’s unfair restrictions on the export of rare metals. According to international trade rules, China should allow access to rare metals. The Chinese Ministry of Commerce deflected accusations by pointing out that “China was taking measures to protect its environment and resources.”

China has been busy acquiring overseas resources. Its resource development group, the East China Mineral Exploration & Development Bureau, increased its stake in Arafura Resources, an Australian company that mines rare metal, rare earth and uranium, to 25% in June. In July, China Investment Corporation (CIC), the state-owned Sovereign Wealth Fund, purchased a 17.2% stake in Tech Resources, Canada’s largest resource company. Teck mines coal, copper, zinc, gold and molybdenum and plans to explore for and develop rare earth and rare metals such as tantalum.

This is the first of two parts.

Real Japanese












その中国は今、レアアースの輸出規制を強めている。中国のレアアース生産量は伸び続け、2008年は02年比で約60%増加したが、輸出は03年以降 減り続けている。レアアースの国内消費量が急増し、12年ごろに生産量と国内消費量がほぼ等しくなると予想されることが、この背景にある。






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