Japan spreads rare earth risk

Japan has been dealt a number of blows over the past few years which have put the country's high-tech production capacity at risk. Most recently, the massive earthquake and subsequent tsunami that hit Japan in March has directly affected production efforts through rolling blackouts and damaged equipment.
Another issue, and one that has been missed by public scrutiny, is the country's struggle to obtain steady supplies of certain key materials needed to produce its high-tech products. Some of those key ingredients are rare earth elements (REEs), of which China has been cutting back export quotas. China has also reportedly announced that it was going to create a REE strategic reserve, a measure that some analysts feel will give the country more control over the industry. In an industry that is ever
changing, other countries, whose economies and national security depend on technologies produced with REEs, could learn by Japan's example.
While REEs have long been in the cross-hair of industry analysts, the issue of REE production and supply increased its public spotlight in 2010 after a territorial dispute between China and Japan over the Senkaku/Diaoyou islands during which China imposed a de facto ban on all rare earth exports to Japan. The ban, according to Japanese Economy, Trade, and Industry Minister Akihiro Ohata, further reinforced the idea that the country needed "to craft a long-term strategy to procure rare earths".
China first began cutting back export quotas for REEs in 2006. Japan began to take action to reduce its reliance on its neighbor by early 2007. Dudley Kingsnorth, executive director of the rare earth consulting company Industrial Minerals Company of Australia (IMCOA), is forecasting global demand to increase from 124,000 tonnes annually in 2010 to 250,000-300,000 tonnes by 2020. Of this amount, he expects 110,000 to 130,000 tonnes to account for the rest of world (ROW) demand [1]. In what could be deemed a race for rare earth elements, Japan has already been placing itself at an advantage by taking early action.
REEs are the 15 elements that comprise the family of lanthanides on the periodic table lamps, plus yttrium and scandium. These metals are vital to the production of hundreds of modern technologies such as cell phones, iPods, computer hard drives, green technologies, and critical military weapons systems.
China dominates the industry, producing over 95% of the world's REEs, but the country has been steadily cutting back export quotas, causing worldwide concern [2]. These cuts are a result of several factors including China's desire to stomp out illegal activity, consolidate the industry and stockpile the metals. These cuts, while seemingly necessary for China, enslave nations to the whims of the country's production quotas.
Japan has been seeking to come up with alternatives over the past five years. While Japan's consumption of REEs has been increasing somewhat steadily over the past three decades, imports from China continue to go down. In December, imports were at 4,080 tonnes after trade resumed following China's de facto ban on shipments. In January, Japan imported 1,783 tonnes from China. In February, that number dropped to 1,138 tonnes. In 1995, the country consumed 7,654 tonnes. In 2000, that figure rose to 13,690 tonnes. In 2005, Japan consumed 18,855 tonnes.
Prior to the earthquake and subsequent tsunami that occurred in March, Sojitz Corporation, a Tokyo-based trading company and one of Japan's largest rare earth importers estimated that Japan would use 32,000 tonnes of rare earths in 2011 [3]. Experts estimate that in the near term, Japan's consumption rate will decrease as the country struggles to regain its footing in the production of high tech products and that the country's consumption rate in 2011 will be less than originally forecasted.
The problem is that Japan does not possess any REEs of its own, forcing the country to rely wholly on imports, approximately 90% of which come from China. Therefore, because of its already tight supplies, Japan will likely continue to seek alternatives outside of China.