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INTERVIEW-Japan urges China to ease rare metals supply
November 8, 2007 / 12:29 PM / 10 years ago

INTERVIEW-Japan urges China to ease rare metals supply


(Adds comments from officials and traders, details)

By George Nishiyama

TOKYO, Nov 8 (Reuters) - Japan’s trade minister urged China on Thursday not to put the squeeze on Tokyo and other buyers of its rare metals as Beijing tightens its grip on the resources, which are indispensable for Japan’s high-tech industries.

Minister of Economy, Trade and Industry Akira Amari also told Reuters he would visit South Africa and Botswana next week in a bid to secure alternative sources of the minerals, many of which resource-poor Japan depends almost entirely on China.

Fears about supply security has grown among Japanese firms amid surges in raw material prices, and as China, the source of around 90 percent of rare earth metals and tungsten supplies for Japan, steps up its control over them.

"China’s got Japan’s manufacturers by the throat," said one Japanese energy official who declined to be named.

Motors for hybrid cars -- a market in which Japan leads the world -- cannot be manufactured without rare earth dysprosium, and drilling tools with tungsten tips are vital for the production of compact mobile phones.

Prices of tungsten have approximately quadrupled from 2004, and dysprosium has gone up over three times in the same period, according to the Japanese government.

China banned duty-free exports of rare earth ores for processing earlier this year, and on Wednesday said it would bar foreign investment in mining rare minerals or those that can’t be recycled.

"China needs to understand that no country can prosper by dominating its resources," Amari said in an interview.

"It’s only natural that China would want to use its resources strategically, but it needs to understand that the basic principle in trade is that you can only prosper if your partner is prosperous."



PARTNER AND RIVAL CHINA

While China is a major producer of rare metals, it has become an importer of many minerals due to growing domestic demand brought on by its booming economy and competes with Japan in securing the resources on the global stage.

"China is a partner and a rival. It’s a partnership accompanied by tension," Amari said.

Japanese traders were more blunt.

"China is a real threat," said a senior trader at Japanese rare metals trading company Advanced Material Japan Corporation.

"Japan is way behind China. We know that we’re resource-poor and have to depend on other countries, but the government has not taken steps to deal with that so far."

He said Japan should review its reserves of rare metals to better reflect the current needs of Japanese manufacturers.

Japan began piling up stocks of rare metals -- nickel, molybdenum, chrome, tungsten, cobalt, manganese and vanadium -- in 1983 to cope with the possibility of a supply shortage.

But the reserves do not include rare earth or platinum, which is also in great demand among Japanese automobile makers as it is used as a catalyst to clean car exhaust fumes.

Amari admitted that Japan had lagged behind China in "resources diplomacy", but said he was confident that Japan, by offering development aid, can build ties with potential producers, including African countries.

"Japan is going to tell the countries: ‘we’ll support your efforts to stand on your own feet’ ... All the producer countries share the fear: ‘what happens once we run out of resources’," Amari said.

"We need to offer them a solution. Only Japan can tie-up resources diplomacy with industrial assistance."

Amari also said that during his visit to Africa from Nov. 14, Japan would offer assistance in exploration technology so the countries can verify potential mineral deposits. (Additional reporting by Yoko Kubota; Editing by Malcolm Whittaker)




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