HONG KONG China officially denied on Thursday that it had halted exports to Japan of a crucial category of minerals, but industry executives said that factories in China were still not shipping to Japan after Chinese customs agents blocked shipments earlier this week.
The minerals are so-called rare earths, which are used in products like wind turbines and hybrid cars.
Gary L. Billingsley, executive chairman of the Great Western Minerals Group, a Canadian company with rare earth processing factories in Michigan and Britain, said China appeared to have stopped shipping rare earths to Japan on Tuesday.
Japanese traders confirm that there has definitely been a disruption in the supply of rare earths, Mr. Billingsley said. Shipments loaded before Tuesday have continued to arrive at Japanese ports, he said, adding that Great Western had not experienced any disruption because it bought supplies directly from China.
Eight industry executives and analysts said that China had suspended the shipments on Tuesday in response to a diplomatic dispute over Japans detention of a Chinese fishing trawler captain. Some theorized that the action might have been taken by Chinese customs agents, rather than as a formal trade embargo imposed by government regulations, to give Beijing more negotiating room with Japan.
China mines 93 percent of the worlds rare earth minerals and more than 99 percent of the worlds supply of some of the most prized rare earths, which sell for several hundred dollars a pound.
Thursday was a holiday in Japan, and before the work day began there on Friday, there was no conclusive word from the Japanese government about the blocked shipments.
We are still investigating, Masaki Shimode, a spokesman for Japans Ministry of Trade, said. We are not yet ready to react.
But industry executives, analysts and two Japanese trader confirmed that rare earths bound for Japan stopped leaving Chinese ports on Tuesday. China has export quotas for rare earths, but even factories with ample quotas for further exports had been dissuaded from making shipments, they said.
People are mystified why the Chinese dont acknowledge it, said Dudley Kingsnorth, the executive director of the Industrial Minerals Company of Australia, a rare earth consulting company.
An official at one of Japans top traders in rare earths, who spoke on condition of anonymity, said Chinese customs officials had blocked rare earth shipments bound for Japan on Tuesday. But because Chinese offices, including customs, closed down then for the Chinese Autumn Equinox holiday, industry players were still unsure whether the blockage was the start of a longer-term embargo.
The trading company would know on Monday, the first business day after the holiday, whether Chinese customs were once again letting shipments go through, the official said. If China did continue to halt shipments, it would be extremely difficult to switch to other sources, he said.
Rare earths are used in a wide variety of industrial applications, including the manufacture of glass, batteries, catalytic converters, compact fluorescent bulbs and computer display screens. Demand has surged in the last decade for clean energy applications, like generators for large wind turbines and lightweight electric motors for cars.
Japanese automakers in particular have been turning to rare earths for the electric motors used in power steering in conventional gasoline-powered cars, as well as the more powerful electric motors that help propel gasoline-electric hybrid cars like the Prius.
Some industry analysts predicted on Thursday that the Chinese government would relent soon and allow a resumption of rare earth exports to Japan, having made the point that China had considerable economic leverage over Japan these days.
This is politics in my view, it wont last, said Judith Chegwidden, a managing director of the Roskill Consulting Group in London.
Ms. Chegwidden said that the way China had selectively blocked the rare earths was significant. The halted shipments involved rare earth oxides, rare earth salts and pure rare earth metals all of which are carefully tracked by customs officials for compliance with government export quotas.
But shipments to Japan have continued of various alloys that include rare earth metals. These alloys are not subject to export quotas, so they do not receive special attention from Chinese customs officials, and would be hard to stop even if the Chinese government decided to do so.
They picked on things for which its relatively easy because theyve got a quota, Ms. Chegwidden said.
Others in the industry said that having Chinas customs agency halt exports of rare earths, without calling it an export ban, carried political and legal advantages. Imposing an unannounced embargo, they said, would allow China to ratchet up the pressure gradually on Japan to release the detained boat captain.
And an export halt carried out through administrative measures, rather than as an act of official policy, would be much harder for Japan to challenge at the World Trade Organization, which bans most unilateral export restrictions. Under W.T.O. rules, countries may formally suspend exports of natural resources only for environmental conservation.
China announced in July that it would steeply reduce its rare earth export quotas. That had prompted Molycorp, the only current American producer of rare earths, to consider expanding its own output by processing minerals extracted before the companys mine closed eight years ago, according to Mark A. Smith, Molycorps chief executive.
But Molycorps production, 3,000 tons a year, is tiny compared with that of China, nearly 120,000 tons a year.
This dispute is between two governments who have issues that clearly extend far beyond rare earth supplies, Mr. Smith said in an e-mail.
Hiroko Tabuchi contributed reporting from Tokyo.
http://www.nytimes.com/2010/09/24/business/energy-environment/24mineral.html
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you got the wrong guy.
