Japan steps up efforts to procure rare earths
TOKYO (MarketWatch) — Japan’s efforts to procure rare earths has continued to intensify in the face of reported declines in Chinese exports, with Toshiba Corp. and Sojitz Corp. recently announcing separate actions aimed at ensuring the nation’s supplies.
Japanese companies had been reporting large declines in imports of rare earths from China, particularly after the spat between the two nations in disputed waters in the East China Sea in August.
While imports have apparently been improving lately, Japan, the world’s largest rare-earth importer, “has moved to reduce its reliance on the Chinese supply of rare earths,” analysts at UBS said in a note to clients Friday.
Last week, Japan’s Sojitz Corp. (JP:2768 162.00, -7.00, -4.14%) /quotes/comstock/11i!szhff (SZHFF 0.00, 0.00, 0.00%) said it’s formed a distribution and financing alliance with Australia’s Lynas Corp. /quotes/comstock/22x!e:lyc (AU:LYC 1.61, 0.00, 0.00%) /quotes/comstock/11i!lyscf (LYSCF 1.58, +0.02, +1.28%) to help supply Japan with rare earths.
Toshiba (JP:6502 424.00, +1.00, +0.24%) /quotes/comstock/11i!tosbf (TOSBF 5.00, -0.10, -1.96%) has also developed technology for extracting rare earths and rare metals from a byproduct of uranium processing, according to a report in The Nikkei business daily Monday.
The electronics company plans to begin trials at a Kazakhstan mine operated by nuclear company Kazatomprom and Japan Oil, Gas and Metals National Corp. will provide funding assistance, the report said.
The news comes on the heels of the company’s announcement Friday that it’s signed a pact with Mongolia’s MNFCC LLC. The two companies will begin discussions on a possible cooperation in the development of Mongolia’s mineral resources, including uranium, rare earth and rare metals products.
MNFCC provides strategic advice and policy implementation for development of mineral resources, energy and social infrastructure in Mongolia.
Shares of Toshiba and Sojitz climbed in Tokyo’s late morning trading Monday. Electronics manufacturer Toshiba added 2.6% and trading house Sojitz tacked on 3.1% as the Nikkei Stock Average /quotes/comstock/11b!i:ni225 (JP:NI225 10,069, +29.82, +0.30%) added 0.3%.
Lynas fell 0.6% as the S&P/ASX 200 /quotes/comstock/27w!i:xat (AU:XAT 4,605, +4.14, +0.09%) lost 0.5%.
Among the rare-earth producers, Aluminum Corp. of China, also known as Chalco, /quotes/comstock/22h!e:2600 (HK:2600 6.82, -0.14, -2.01%) /quotes/comstock/28c!e:601600 (CN:601600 10.17, -0.21, -2.03%) declined by 1.9% in Hong Kong and fell 1.8% in Shanghai. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. /quotes/comstock/28c!e:600111 (CN:600111 70.54, -3.52, -4.75%) dropped 4.6% in Shanghai, though it has more than doubled year to date. China Rare Earth Holdings Ltd. /quotes/comstock/22h!e:769 (HK:769 3.39, +0.06, +1.80%) climbed 2.4% in Hong Kong, defying a 0.2% decline in the Hang Seng. The Shanghai Composite was down 0.6%.
“The past three months have seen considerable share price gains for some rare and minor metals (RMM) equities, as investors become aware of the potential for future supply shortages and consequent high metals prices,” according to a recent report from analysts at Resource Capital Research.
Although speculation has cooled in the past month, “companies that have quality projects should retain some of their recent gains while prices remain above their pre-2H10 levels,” the analysts’ report said.
China’s policy shift
China, which supplies more than 90% of the world’s rare earths, has announced cuts in export quotas for rare earths. Reports over the summer pegged the export-quota cuts at between 40% and 70% year-on-year.
China has been reforming its RMM metals sectors by “raising tariffs, reducing export quotas and encouraging consolidation and vertical integration of production,” said analysts at Resource Capital Research.
The country has said it aims to increase domestic value-adding and use of rare and minor metals, conserve resources and improve industry monitoring and efficiency, they said.
China’s actions “could boost global RMM production,” said analysts at Resource Capital Research.
But the recent policy shift is “critical to the stability of short-term supply” worldwide, said analysts at UBS. “There are only a few operations outside of China that produce rare earths, in India, Brazil and Malaysia.”
“Major consuming nations, including Japan, are attempting to diversify supply sources in response to China’s policy shift but in the short term, all remain heavily on China’s industry and trade,” they said.
New production from the majority of rare earth companies “remains some years away,” according to UBS analysts.
Myra P. Saefong is MarketWatch's assistant global markets editor, based in Tokyo.
Japanese companies had been reporting large declines in imports of rare earths from China, particularly after the spat between the two nations in disputed waters in the East China Sea in August.
While imports have apparently been improving lately, Japan, the world’s largest rare-earth importer, “has moved to reduce its reliance on the Chinese supply of rare earths,” analysts at UBS said in a note to clients Friday.
Last week, Japan’s Sojitz Corp. (JP:2768 162.00, -7.00, -4.14%) /quotes/comstock/11i!szhff (SZHFF 0.00, 0.00, 0.00%) said it’s formed a distribution and financing alliance with Australia’s Lynas Corp. /quotes/comstock/22x!e:lyc (AU:LYC 1.61, 0.00, 0.00%) /quotes/comstock/11i!lyscf (LYSCF 1.58, +0.02, +1.28%) to help supply Japan with rare earths.
Toshiba (JP:6502 424.00, +1.00, +0.24%) /quotes/comstock/11i!tosbf (TOSBF 5.00, -0.10, -1.96%) has also developed technology for extracting rare earths and rare metals from a byproduct of uranium processing, according to a report in The Nikkei business daily Monday.
The electronics company plans to begin trials at a Kazakhstan mine operated by nuclear company Kazatomprom and Japan Oil, Gas and Metals National Corp. will provide funding assistance, the report said.
The news comes on the heels of the company’s announcement Friday that it’s signed a pact with Mongolia’s MNFCC LLC. The two companies will begin discussions on a possible cooperation in the development of Mongolia’s mineral resources, including uranium, rare earth and rare metals products.
MNFCC provides strategic advice and policy implementation for development of mineral resources, energy and social infrastructure in Mongolia.
Shares of Toshiba and Sojitz climbed in Tokyo’s late morning trading Monday. Electronics manufacturer Toshiba added 2.6% and trading house Sojitz tacked on 3.1% as the Nikkei Stock Average /quotes/comstock/11b!i:ni225 (JP:NI225 10,069, +29.82, +0.30%) added 0.3%.
Lynas fell 0.6% as the S&P/ASX 200 /quotes/comstock/27w!i:xat (AU:XAT 4,605, +4.14, +0.09%) lost 0.5%.
Among the rare-earth producers, Aluminum Corp. of China, also known as Chalco, /quotes/comstock/22h!e:2600 (HK:2600 6.82, -0.14, -2.01%) /quotes/comstock/28c!e:601600 (CN:601600 10.17, -0.21, -2.03%) declined by 1.9% in Hong Kong and fell 1.8% in Shanghai. Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. /quotes/comstock/28c!e:600111 (CN:600111 70.54, -3.52, -4.75%) dropped 4.6% in Shanghai, though it has more than doubled year to date. China Rare Earth Holdings Ltd. /quotes/comstock/22h!e:769 (HK:769 3.39, +0.06, +1.80%) climbed 2.4% in Hong Kong, defying a 0.2% decline in the Hang Seng. The Shanghai Composite was down 0.6%.
“The past three months have seen considerable share price gains for some rare and minor metals (RMM) equities, as investors become aware of the potential for future supply shortages and consequent high metals prices,” according to a recent report from analysts at Resource Capital Research.
Although speculation has cooled in the past month, “companies that have quality projects should retain some of their recent gains while prices remain above their pre-2H10 levels,” the analysts’ report said.
China’s policy shift
China, which supplies more than 90% of the world’s rare earths, has announced cuts in export quotas for rare earths. Reports over the summer pegged the export-quota cuts at between 40% and 70% year-on-year.
China has been reforming its RMM metals sectors by “raising tariffs, reducing export quotas and encouraging consolidation and vertical integration of production,” said analysts at Resource Capital Research.
The country has said it aims to increase domestic value-adding and use of rare and minor metals, conserve resources and improve industry monitoring and efficiency, they said.
China’s actions “could boost global RMM production,” said analysts at Resource Capital Research.
But the recent policy shift is “critical to the stability of short-term supply” worldwide, said analysts at UBS. “There are only a few operations outside of China that produce rare earths, in India, Brazil and Malaysia.”
“Major consuming nations, including Japan, are attempting to diversify supply sources in response to China’s policy shift but in the short term, all remain heavily on China’s industry and trade,” they said.
New production from the majority of rare earth companies “remains some years away,” according to UBS analysts.
Myra P. Saefong is MarketWatch's assistant global markets editor, based in Tokyo.
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