Thursday, September 23, 2010

NYT: China Cuts Off Rare Earth Shipments to Japan

This is one way to put resource issues on the front page:
HONG KONG — Sharply raising the stakes in a dispute over Japan’s detention of a Chinese fishing trawler captain, the Chinese government has blocked exports to Japan of a crucial category of minerals used in products like hybrid cars, wind turbines and guided missiles.

Chinese customs officials are halting shipments to Japan of so-called rare earth elements, preventing them from being loading aboard ships at Chinese ports, industry officials said on Thursday.

On Tuesday, Prime Minister Wen Jiabao personally called for Japan’s release of the captain, who was detained after his vessel collided with two Japanese coast guard vessels about 40 minutes apart as he tried to fish in waters controlled by Japan but long claimed by China. Mr. Wen threatened unspecified further actions if Japan did not comply.

Dudley Kingsnorth, the executive director of the Industrial Minerals Company of Australia, a rare earth consulting company, said that several executives in the rare earths industry had already expressed worries to him about the export ban. The executives have been told that the initial ban lasts through the end of the month, and that the Chinese government will reassess then whether to extend the ban if the fishing captain still has not been released, Mr. Kingsnorth said.

“By stopping the shipments, they’re disrupting commercial contracts, which is regrettable and will only emphasize the need for geographic diversity of supply,” he said. He added that in addition to telling companies to halt exports, the Chinese government had also instructed customs officials to stop any exports of rare earth minerals to Japan.

Industry officials said that mainland China’s customs agency had notified companies that they were not allowed to ship to Japan any rare earth oxides, rare earth salts or pure rare earth metals, although these shipments are still allowed to go to Hong Kong, Singapore and other destinations. But no ban has been imposed on the export to Japan of semi-processed alloys that combine rare earths with other materials, the officials said. China has been trying to expand its alloy industry so as to create higher-paying jobs in mining areas, instead of exporting raw materials for initial processing.

Japan has been the main buyer of Chinese rare earths for many years, using them for a wide range of industrial purposes, like making glass for solar panels. They are also used in small steering control motors in conventional gasoline-powered cars as well as in motors that help propel hybrid cars like the Toyota Prius.
Definitely read the whole thing.  I think the rest of the world is now on notice that China is willing to use its near monopoly on rare earth production as leverage in a very crude way (in this case over a very minor border dispute).
American companies now rely mostly on Japan for magnets and other components using rare earth elements, as the United States’ manufacturing capacity in the industry became uncompetitive and mostly closed over the last two decades.

The Chinese halt to exports is likely to have immediate repercussions in Washington. The House Committee on Science and Technology is scheduled on Thursday morning to review a detailed bill to subsidize the revival of the American rare earths industry. The main American rare earths mine, in Mountain Pass, Calif., closed in 2002, but efforts are under way to reopen it.
Sounds like a great idea...


bmerson said...

Now showing in a resource conflict theater near you... Japan/China...

Coming soon?

We are moving towards a monopolistic global barter economy ... food for oil for rare earth for fresh water for military supplies/protection....

If you don't have everything you need, and if your economy/state is going to survive, you better have a lot of something that somebody else needs. This is a world where the power brokers are going to be countries with large, excess supplies of critical resources.

I'm not sure that that is much different from what we currently have, or perhaps have always had. Perhaps the big difference is that once upon a time (for most of my life), the US had lots of lots of different resources, so lots of leverage. Now we have food, guns and reserve currency. Not sure that that's going to be a great stake in a global game of Texas Hold'em.

Stuart Staniford said...

Well, maybe the threat worked - today the Japanese released the Chinese captain. The NYT seems a bit internally conflicted on how much credence to give the rare earth thing. In today's story (linked above), it only rates a one sentence mention at the end: "Some metals traders say China has halted sales of rare earth metals to Japan, although China denies this"