Chinese Adamant On Rare-Earth Metal Cuts
8/30/2010

China on Saturday rejected a request from the Japanese government not to cut exports of rare-earth metals that are vital to the production of a wide range of electrical products, such as hybrid vehicles and liquid crystal displays.

Japanese industry minister Masayuki Naoshima asked Chinese Minister of Industry and Information Li Yizhong and Commerce Minister Chen Deming for reductions to this year's export quota to be reversed in a meeting at the "Japan-China high-level economic dialogue" of economic ministers in Beijing.

Naoshima told the Chinese ministers: "In the second half of this year alone, the export quota is being reduced by 70 percent. The reduction is too sharp."

The Japanese side repeated the request at the main session of the conference, with all economy-related ministers from both countries present.

But China, which produces more than 90 percent of the world's rare-earth metals, refused to budge on its policy of limiting access.

In July this year, it announced an export quota of the vital raw materials for the second half of this year of about 8,000 tons, considerably less than the quota for the first half of the year. The combined quota for 2010, 30,000 tons, represents a 40 percent reduction from 2009.

According to Japanese government officials, one of the Chinese ministers at the bilateral meeting said, "It is necessary to reduce production (of rare-earth metals) from the viewpoint of environmental protection."

Another minister said, "It is necessary to save those metals as they are likely to be exhausted."

Chen stressed to reporters that the policy was not just about exports, "We are also limiting mining of those metals (as well as reducing exports). I want (Japan) to understand that."

Rare-earth metals are a group of chemically similar metallic elements, including lanthanum, cerium and neodymium, many of which are used in the production of modern electrical devices, including hybrid vehicles, liquid crystal displays and energy-saving home appliances.

Naoshima told the Chinese ministers that Japan could provide technological help to address their worries about environmental pollution, but economic as well as ecological concerns may be behind China's new course. Limiting exports will allow domestic producers privileged access to strategically important resources and increase the prices for the materials China does send abroad.

Earlier this month, an executive of China's Ministry of Land and Resources said in an interview for a local television program, "Due to the excessive development (of rare-earth metals), their prices have been pushed down." The executive quoted a high-ranking official of a local government (in China) as complaining that their prices are like those of radishes or Chinese cabbages.

The Chinese authorities appear to want to process the rare-earth metals in China, adding value before exporting them at much higher prices.

According to a Chinese media organization, an executive of the land and resources bureau of the city government of Heyuan in Guangdong province in southern China said, "If we process rare-earth metals, their prices will become similar to those of gold or diamonds."

The prices of the rare-earth metal cerium, for instance, which is used as an abrasive in liquid crystal television manufacturing, has already jumped to $40 to $50 (3,400 yen to 4,250 yen) per kilogram from $5 to $6 a year ago.

As the amount of cerium used in production is small, the sharp rise in prices is unlikely to immediately hit consumers' purses, but companies are worried about disruption to production.

"China had been reducing export quotas (of rare-earth metals). This reduction came just as Japan's economy is recovering and makers want to obtain them. It is likely that their prices will rise limitlessly. We are shocked," said an executive of a major alloy maker in Japan.

China is expected to limit the overall production of rare-earth metals, not just exports.

"At present, we have stocks. But we are concerned that rare-earth metals will not come to Japan in the future. We have to consider manufacturing our products in China or procuring rare-earth metals from other countries," the executive said.

The first "Japan-China high-level economic dialogue" was held in December 2007 in Beijing. Six Japanese ministers took part in this year's meeting, including Naoshima and Foreign Minister Katsuya Okada. The Chinese participants included Vice Premier Wang Qishan.

Though the ministers from the two countries could not reach agreement on rare-earth metals, they did agree on cooperation to protect bluefin tuna and to start regular vice-minister-level talks between the Japan's Ministry of Economy, Trade and Industry and the Chinese ministry of industry and information.