China’s mid-2010 announcement that it would drastically reduce rare earth exports has raised significant concerns in Japan, which currently depends on China for over 90% of its supply of rare earth. During the last two months of 2010, all shipments of rare earth from China to Japan ceased, and prices for rare earth jumped by 230%. Both the government and the private sector in Japan are now working to take a number of steps in order to ensure a steady supply of these vital elements.
Sojitz, a major Japanese rare earth importer, estimates that world demand for rare earth in 2011 will be approximately 113,600 metric tons, with Japanese demand representing some 30% (32,000 metric tons) of the world total. With a reduction in exports from China and resulting increasing prices, it is expected that there will be a sizeable gap between supply and demand in Japan over the next few years.
Large Japanese trading firms have responded quickly to this sudden reduction of supply. As shown in the below Key Supplier section, during the last few months of 2010 four major Japanese trading firms secured mining rights for a total of 15,000 metric tons/year (or about half of Japan’s current domestic demand) of new supply sources outside China. While this should help Japan in the medium term, there may be considerable short- and long-term supply-demand gaps as these new supply sources can prepare to export, and as demand for rare earth for Japan’s high-tech industry is expected to increase rapidly and quickly far exceed the capacity of existing supply sources.
The Government of Japan (GOJ) has also responded quickly, announcing numerous measures to facilitate a wide variety of alternative approaches to the issue. Through these measures, the GOJ is trying to diversify its sources of supply of rare earth to include sources other than China, develop technology for recycling rare earth, reduce usage of rare earth, and develop alternative materials. Through these measures the GOJ aims to secure enough volume to maintain the demand for high technology businesses in Japan.