x Abu Dhabi, UAEWednesday 26 July 2017

Japan looks to Central Asia for rare earth supply

Japan is desperate for Kazatomprom to accelerate the rare earth joint ventures it launched this year with Sumitomo and Toshiba.

A rare earth metals mine in China's Jiangxi province. The government has tightened controls on the rare materials it considers critical to its rapid economic development.
A rare earth metals mine in China's Jiangxi province. The government has tightened controls on the rare materials it considers critical to its rapid economic development.

This month a team of executives from Kazatomprom, the Kazakh state company that is the world's biggest uranium producer, were invited to the economy ministry in Tokyo.

The ministry was not interested in discussing fuel supplies for its nuclear power plants. It wanted to talk about rare earth metals.

For almost a month China, which is responsible for more than 93 per cent of rare earth metals production, has imposed a de facto embargo on exports of the metals to Japan, the world's biggest user.

As a result, Japan is desperate for Kazatomprom to accelerate the rare earth joint ventures it launched this year with Sumitomo and Toshiba.

Once an obscure corner of the mining industry, rare-earth metals - 17 elements from the middle of the periodic table - are increasingly essential for making computer screens, hybrid cars, superconductors and even the iPod.

The leading hybrid car, the Toyota Prius, relies on a rare earth magnet made partly from neodymium.

The lure for the Japanese in Kazakhstan is a plant once so secret it was known only by the codename "2A".

The core of the former Soviet Union's nuclear weapons programme, the Ulba Metallurgical Plant developed skills in rare metals and rare elements - particularly in beryllium, tantalum and niobium - that are still unmatched more than 20 years on.

Even today it is one of only three plants in the world capable of making finished strips of beryllium and it has advanced capabilities for making super-conducting cables.

"The Cold War had some advantages," said an official at Kazatomprom who asked not to be identified. "Ulba had the best research and development in the Soviet era. The people there are still experts, they haven't stopped."

Sumitomo of Japan has already opened an office next door to Ulba for its joint venture with Kazatomprom, called the Summit Atom Rare Earth Company.

It is working on a feasibility study and a pilot plant to produce rare earth compounds and products, sourcing the raw material from tailings, or waste material piles, of Kazakhstan's uranium industry.

But the joint venture is still waiting for the final go-ahead from the Kazakh authorities.

Toshiba signed a memorandum of understanding with Kazatomprom in June and a joint venture is due to be established by the end of this year.

The urgency is increasing. China has yet to fully end the embargo, which was never official. Chinese customs officials have simply blocked all rare earth shipments to Japan in what looks like punishment for Japan's intransigence in its dispute over the uninhabited Senkaku Islands.

At the same time, China is cranking up tariffs and reducing export quotas. After cutting export quotas this year by 40 per cent, Beijing is planning a further 30 per cent decrease next year.

The result is that rare earth metal prices are soaring, with most more than doubling in the past few months alone. With demand expected to increase about 12 per cent a year, rising from 124,000 tonnes annually today to 170,000 tonnes in the next three years, the pressure on prices and supplies is not expected to relent.

business@thenational.ae