China Denies Japan Rare-Earth Ban Amid Diplomatic Row

By Bloomberg News
(c) 2010 Bloomberg News
Thursday, September 23, 2010; 8:38 AM

Sept. 23 (Bloomberg) -- China denied reports it banned the export of rare earths to Japan in retaliation for the detention of a Chinese fishing boat captain, threatening supplies of a raw material vital to hybrid cars, laptops and iPhones.

"China does not have a trade embargo on rare earth exports to Japan," Ministry of Commerce spokesman Chen Rongkai said in a telephone interview today. Industrial Minerals Co. of Australia, an industry publication and consultancy, first reported the ban yesterday, citing an unidentified "leading Japanese rare earth buyer."

"The Chinese government has requested exporters to demonstrate support for the Chinese situation and suspend exports of rare earths to Japan until the end of the month when the situation will be reviewed," said Industrial Minerals owner and former mining executive Dudley Kingsnorth. "It's very regrettable if we have the effective suspension of commercial contracts for political reasons."

True or false, the reports may fuel concerns over China's control of more than 95 percent of the global supply of rare earths. The U.S. Department of Defense is this month due to complete a review of its dependency on the minerals for missile guidance systems, smart bombs and satellites.

Japan and China are both on national holidays today.

China cut export quotas for the minerals by 72 percent for the second half of this year, citing a shortage of supply for domestic manufacturers. The accusations of further restrictions to Japan come as Asia's two biggest economies are embroiled in a diplomatic row over the Sept. 7 detention of the skipper in waters around a group of uninhabited islets and outcrops about 200 miles (322 kilometers) off the northeast coast of Taiwan.

Chinese Premier Wen Jiabao this week demanded Japan "immediately and unconditionally" release the skipper or face retaliatory action. Japan has refused to let him go, saying that the case is being handled in the country's court system.

China said this week it had severed senior-level government contacts after Japanese prosecutors extended the captain's detention until Sept. 29. Japan's foreign ministry on Sept. 20 said China had revoked an invitation for 1,000 youths to attend the Shanghai World Expo, and ticket sales for two concerts in the city by pop band SMAP were suspended, Asahi newspaper reported.

Kingsnorth, who managed the Mount Weld rare earths project for Ashton Mining of Canada Inc. for 10 years and has worked for BHP Billiton Ltd., Rio Tinto Group and Alcoa Inc., said China's actions to restrict trade in rare earths would only spur buyers to develop alternative supplies.

Rare earths are a group of chemically similar metallic elements, including lanthanum, cerium, neodymium and europium. They are used in radar, high-powered magnets, mini hard-drives in laptop computers, catalytic converters for vehicles, electric-car batteries and wind turbines. Many are difficult to substitute with alternatives.

While relatively abundant in the earth's crust, finding deposits of rare earths significant enough to mine is less common, the U.S. Geological Survey says. China, the countries that made up the former Soviet Union and the U.S. have the largest reserves.

China's shipments will be capped at 7,976 metric tons, down from 28,417 tons for the same period a year ago, according to data from the Ministry of Commerce on July 8.

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