Latest on rare earth trade embargo!Appears China has cut off Japan from rare earth shipments.
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https://www.nytimes.com/2010/09/25/business/global/25minerals.html?src=busln
HONG KONG — Akihiro Ohata, the Japanese trade minister, said Friday that his ministry was aware that Japanese traders were complaining of a halt from China of a crucial category of minerals and that the government was investigating the matter.
The Chinese Commerce Ministry has denied that it has halted exports of the minerals, known as rare earths and used in products like wind turbines and hybrid cars. And Mr. Ohata said the Chinese Commerce Ministry had also informed Japan that it had not issued a ban on exporting the minerals.
But industry executives said that factories in China were still not shipping to Japan after Chinese customs agents blocked shipments earlier this week.
Eight executives, analysts and traders in the Chinese, Japanese and North American rare earths industries said that China had suspended the shipments Tuesday in response to a diplomatic dispute over Japan’s detention of a Chinese fishing trawler captain.
Some theorized that the action might have been taken by Chinese customs agents, rather than as a formal trade embargo imposed by Commerce Ministry regulations, to give Beijing more negotiating room with Japan.
On Friday, the Japanese authorities said they would release the captain, but it was unclear when the rare earth exports would resume.
Gary L. Billingsley, executive chairman of Great Western Minerals Group, a Canadian company with rare earth processing factories in Michigan and Britain, said China appeared to have stopped shipping rare earths to Japan on Tuesday.
Japanese traders “confirm that there has been a disruption in the supply of rare earths,” Mr. Billingsley said. Shipments loaded before Tuesday have continued to arrive at Japanese ports, he said, adding that Great Western had not experienced any disruption because it bought supplies directly from China.
China mines 93 percent of the world’s rare earth minerals and more than 99 percent of the world’s supply of some of the most prized rare earths, which sell for several hundred dollars a pound.
A supplier for Toyota in Japan, who deals in machinery parts that require magnets containing rare earths, said that the automaker had alerted his company Monday of a possible halt in rare earth shipments. “Toyota is already seeing shipments being stopped,” said the supplier, who spoke on condition of anonymity.
A Toyota spokesman, Paul Nolasco, had no immediate comment.
China has export quotas for rare earths, but even factories with ample quotas for further exports had been dissuaded from making shipments, according to industry executives, analysts and two Japanese traders.
“People are mystified why the Chinese don’t acknowledge it,” said Dudley Kingsnorth, the executive director of Industrial Minerals Co. of Australia, a rare earth consulting company.
An official at one of Japan’s top traders in rare earths, who spoke on condition of anonymity, said that because government offices in Beijing, including the customs headquarters, were closed Wednesday through Friday for the Chinese autumn equinox holiday, industry players were still unsure whether the halt in exports was the start of a longer embargo.
Trucking, ports and local customs offices continue to operate during weekends and holidays. But Chinese rare earths operations have halted shipments to Japan for the last three days anyway in response to strong warnings Tuesday from Beijing officials against selling to Japan, industry executives said.
A person answering the phones at the customs headquarters in Beijing said no one would be available for comment until Saturday.
If China continued to halt shipments, it would be extremely difficult to switch to other sources, the Japanese trader said.
Rare earths are used in a wide variety of industrial applications, including the manufacture of glass, batteries, catalytic converters, compact fluorescent bulbs and computer display screens. Demand has risen in the last decade for their use in clean energy applications, like generators for large wind turbines and lightweight electric motors for cars.
Japanese automakers in particular have been turning to rare earths for the electric motors used in power steering in gasoline-powered cars, as well as the more powerful electric motors that help propel gasoline-electric hybrids like the Toyota Prius.
Others in the industry said that having the customs agency halt exports of rare earths, without calling it an export ban, carried political and legal advantages. Imposing an unannounced embargo, they said, would have allowed China to ratchet up the pressure gradually on Japan to release the detained boat captain.
And a halt in exports carried out through administrative measures, rather than as an act of official policy, would be much harder for Japan to challenge at the World Trade Organization, which bans most unilateral export restrictions. Under the trade agency’s rules, countries may formally suspend exports of natural resources only for environmental conservation.
Further confusing the rare earths issue in the past week has been uncertainty over Chinese export quotas for rare earths, with some in the United States suggesting that shipment data showed that exporters in China might be running out of their quotas for this year.
But experts on the Chinese export quota process said that there tended to be about a one-month lag from the exercise of quotas until they showed up in shipment data. So large shipments last January reflected the last-minute exercise of 2009 quotas in December and were not counted against 2010 quotas.
The 2010 quotas were not issued until Dec. 31, and exporters then typically needed several weeks to arrange shipping.
Exports from the start of February through the end of August totaled about 23,000 tons, compared with export quotas this year of 30,300 tons. So some experts predict that exporters in China could run out of quotas as soon as the end of October, although that had nothing to do with suspension of exports in the past week.
But some industry officials have suggested that China might be willing to issue the quotas for 2011 early, possibly in November, so as to allow shipments to resume quickly early in January.
Hiroko Tabuchi reported from Tokyo.
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Things seem to be heating up now,
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