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The Associated Press October 21, 2010, 8:06AM ET

China rare earth exports to Japan still halted

Japanese importers said Thursday that Chinese exports of rare earth metals crucial in high-tech products are still halted after a month, and the government is investigating reports that some Chinese exporters have unilaterally scrapped contracts with Japanese customers.

Japanese companies say Beijing has blocked rare earths shipments to Japan since Sept. 21 in possible retaliation for Tokyo's arrest of a Chinese fishing boat captain near disputed islands.

The captain was released -- and Beijing denies any official ban on shipments to Japan -- but Japanese authorities say supplies have yet to resume.

Without a sign of improvement, Japanese companies say they worry that Chinese exporters may cancel contracts for the Japan-bound shipments held up by China's customs service and shift them to clients in other countries so they can bring in profits before their export quota expires in December.

China has about 30 percent of global rare earth deposits but accounts for about 97 percent of production.

An official at a top Japanese importer of rare earths said he was aware of several cases in which other companies have seen their rare earths shipment contracts unilaterally scrapped by Chinese exporters.

His company's shipment is still stuck at customs but believed the contract had not been scrapped, the official said on condition of anonymity, citing the sensitivity of the issue.

The Asahi newspaper reported Thursday that several Japanese companies have been notified by Chinese rare earths suppliers that they were canceling their contracts to ship them to non-Japanese destinations. One trading company asked for a shipment via South Korea but a Chinese shipper refused because of fear of punishment, the Asahi said.

Tsutomu Murasaki, director of the nonferrous metals division at the trade ministry, said the government is investigating the Chinese rare earths shipment situation. He said many importers are increasingly worried about losing their contracts but was not aware of an actual cancellation.

"The situation is not at all back to normal," he said. "Shipments are still piling up at customs, though we heard issuance of export permits have become somewhat smoother."

The recent disruption of Chinese supplies has shaken Japanese industry, which is now looking for new suppliers of the exotic metals other than China, while considering becoming a rare earth recycling center.

Yoshihide Toh, spokesman for Sojitz Corp., a major Japanese conglomerate whose businesses include rare earths imports, said Japan's import quota of Chinese rare earths is 15,000 tons this year.

Japan, whose demand for the minerals next year is estimated at 32,000 tons, could face about 10,000 tons of rare earths shortage, assuming the same quota allowed by China and additional shipments from outside China, he said.

China's rare earths export quota this year is 24,280 tons, down from 31,310 tons in 2009, according to the Chinese Commerce Ministry. The ministry said Wednesday it will limit exports of rare earths to protect its environment but denied a report shipments will be cut by up to 30 percent next year.

China's plan to cut exports has prompted mining companies in the United States and Canada to launch efforts to resume production.

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