China said it hasn't limited export of rare earth elements to Japan, denying a report that it had halted exports of the materials to its neighbor as retaliation in a territorial dispute.
China said it hasn't limited export of rare earth elements to Japan,
denying a report that it had halted exports of the materials to its neighbor as
retaliation in a territorial dispute.
"
China
doesn't block rare earth exports to Japan," Chen Rongkai, a spokesman for
China
's
Ministry of Commerce, said Thursday.
(This story and related background material will be available on The Wall
Street Journal Web site, WSJ.com)
The New York Times, citing industry officials, reported Thursday that Chinese
customs officials had blocked shipments of the minerals to
Japan
in
response to
Japan
's
detention on Sept. 7 of a Chinese fishing boat captain whose trawler collided
with Japanese patrol vessels near islands both countries claim.
China
produces
well over 90% of the world's output of rare earth elements, which are critical
to making certain technology products like batteries for electric cars. The
report followed a brief article in Industrial Minerals, a trade magazine,
citing a Japanese trader it didn't name also claiming
China
had
barred exports of the materials to
Japan
.
Most government and business offices were closed in both
China
and
Japan
for
holidays on Thursday. Several industry executives and government officials in
Japan
and
China
said
they had seen no evidence of such a ban in the rare-earth trade--although some
said they had heard rumors or reports of such a move. Industry participants
said there are broader concerns about global supply of rare earth elements
after
Beijing
earlier
this year issued sharply reduced export quotas for the materials that are now
nearly exhausted.
"The Japanese government hasn't been informed" of any Chinese ban on
rare earth materials, a Japanese foreign ministry official said. An official in
Tokyo
at the Ministry of Economy, Trade and Industry
also said the Japanese government hasn't received any notice from the Chinese
government on a ban and is "now trying to confirm" if there is
anything to the reported embargo. Another Japanese economic official, who
watches China closely, said his office would flash a "red alert" if
evidence were found to support the reports, but that so far they hadn't found
any such evidence.
A fourth official said Japanese trade officials have received some reports from
Japanese trading companies that it has become "more difficult" in
recent days to arrange rare earth shipments to Japan, and some have not taken
place as scheduled." He wasn't sure when the difficulties began or what
might have caused them, though he said they could have something to do with the
diplomatic spat.
An executive at a Japanese importer of rare earth elements said his company has
seen no disruption in its imports from
China
. "So
far, nothing has changed," he said. "We've heard rumors this past one
or two days" about a possible cut-off, but as of Thursday afternoon
"we haven't been able to confirm them."
A government official in
Baotou
, a
city in
China
's
Inner
Mongolia
region that is a major mining center and headquarters of Inner Mongolia
Baotou Steel Rare-Earth (Group) Hi-Tech Co., said he hadn't heard of any ban on
exports to
Japan
. Blocking
exports would violate World Trade Organization rules, the official said, and
"I don't think
China
(would) to do this."
An executive at a major European buyer of rare earths said he has seen no
supply disruption at all to their intake and hasn't heard from any Japanese
companies wanting to purchase supply.
Jeff Green, a
U.S.
industry consultant who runs J.A. Green & Co., said by e-mail that over the
past 24 hours "numerous sources in
Japan
"
have told him they have experienced a halt in rare-earth shipments, possibly
due to the overall yearly quota.
Any ban on rare-earth shipments to
Japan
would
mark a startling escalation of the territorial dispute, one that would not only
upset
Japan
but
also risk angering the
U.S.
and
other countries and aligning them against
China
for
using its global commercial clout in a bilateral political dispute.
Chinese officials, including Premier Wen Jiabao, have denounced the captain's
arrest and threatened unspecified actions in response if
Tokyo
doesn't release him, but it has so far limited retaliatory efforts to
suspending political and cultural exchanges trying to curtail tourism.
China
's
decision over the past year to impose global export quotas on rare earth
elements has caused worry among foreign industry executives and government
officials for months.
China
's
Commerce Ministry said total exports for the year would be capped at just under
30,300 metric tons, down 40% from last year. Only 7,976 tons of that were
allocated for the second half of this year, and experts say much of that has
already been shipped.
As the near-monopoly producer of the 17 rare earth elements, which share
certain chemical properties and are critical to manufacturing high-tech
magnets, night-vision goggles and wind turbines,
China
is at
least temporarily in a powerful position to dictate trade in rare earths. High-tech
Japan
is
the world's biggest importer of rare earth minerals.
Over the past year, as Beijing has tightened export quotas on rare earth
elements (quotas that apply globally rather than to particular nations), high
level delegations from the U.S., Germany, and Japan have implored Beijing to
recognize how critical they consider sustained supply.
Premier Wen Jiabao responded to such concerns expressed by a visiting Japanese
delegation led by former Foreign Minister Katsuya Okada last month by pledging
China
would
not halt exports.
Chinese officials have said the tighter export limits this year are motivated
by environmental concerns. Chinese Commerce Minister Chen Deming said during
the meeting with Mr. Okada that "mass-extraction of rare earth will cause
great damage to the environment, that's why
China
has
tightened controls over rare earth production, exploration and trade."
By the end of August,
China
had
exported some 28,500 metric tons of rare earth to customers around the world in
2010, the vast bulk of the 30,300 metric tons it set as the full-year quota,
according to an executive at a foreign rare earth producer who cited Chinese
statistics but who asked not to be identified.
"The fact that we're in mid-September, it would be reasonable to assume
the remaining (about) 2,000 tons has been consumed," according to the person.
Rare earth elements include the relatively common cerium, used in
pollution-control equipment, and terbium, used in energy efficient light bulbs,
as well as the truly rare thulium, which has applications in x-ray devices.
Many of the elements are more abundant than the label suggests. The
U.S.
has
around 13 million tons of reserves in rare earth oxides, according to the U.S.
Government Accountability Office, against 36 million tons in
China
.
Yet, no one is currently producing most rare earth minerals in the
U.S.
,
while Chinese output is around 120,000 tons annually. The best hope for the
U.S.
is a
Mountain Pass, Calif. mine that closed in 2002 and is now being redeveloped by
Colorado-based Molycorp Inc. (MCP), one of several companies in the
U.S.
,
Canada
,
Australia
and
elsewhere racing to exploit concerns about the unbalanced global supply.
Global trade in the elements is nevertheless small:
China
's
annual production weighs less than a single capesized vessel.
Some rare earth industry officials said they believed it possible that
China
might
temporarily cut off exports to
Japan
. But
they said it would pose little immediate threat to global supplies, even though
it might underpin already rising prices for rare earths as the world economy
recovers and demand for products like iPods and electric cars grow.
Dudley Kingsnorth, a known Australia-based industry consultant who runs
Industrial Minerals Company of
Australia
, said
he had heard from a Japanese trading firm that he declined to name that
China
was
"informally" halting trade in rare earths. If there were temporary
disruption, he said the immediate fallout would be limited, noting many users
are sitting on six months or more of stockpiles, which rose during the global
recession.
Yet, even the hint of a politicized reduction in exports from
China
, said
Mr. Kingsnorth, "raises real alarm bells about long term security of
supply and will force companies to look at diversity of supply."
That warning was echoed elsewhere in an industry that has struggled to make the
economics of rare earth mineral production work in the short term, despite
widespread agreement long term reasons dictate improved production.
"It is precisely this type of vulnerability in the overall rare earths
supply chain (for geopolitical reasons and others), that makes it important for
Japan
and
other countries to diversify their supply chains for rare earths," Gareth
Hatch, founding principal of Illinois-based Technology Metals Research LLC said
by e-mail.
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