LONDON (Commodity Online): Japanese companies, which use the rare earths metals in hi-tech products, worry that Beijing is already using its power to squeeze supplies as a political tool in diplomatic disputes with Tokyo, something China denies.

Japanese companies are in full panic mode. As far as they are concerned, this is a red-alert situation. China, as other producers have given up environmentally destructive mining of rare earths, now supplies 97 per cent of the world’s demand for the metals, whose magnetic, luminescent and other qualities make them essential for clean energy, computers and electronics.

For a country with a voracious appetite for imported commodities, it is one over which China can exert control as an exporter. It now wants the metals for itself for technology that it can use at home and export.

It has ambitious goals for advanced wind turbines, hybrid and electric vehicles and other clean energy innovations that use rare earth metals.

The properties of the 17 elements called rare earths also make them handy for military hardware, where Beijing spends big.

The biggest driver in the Chinese system is continued job growth and economic growth, and if they can move a number of high-value manufacturing jobs in the green sector, as well as a lot of the intellectual property, to China by swinging the rare earth hammer, then they're willing to do that.

Spooking the market, however, could backfire and discourage companies hungry for the minerals from setting up shop in China.

Japan has said it will hurry to secure supplies from outside China. US lawmakers are backing plans to restart a shut mine in California. Beijing’s advantage could crumble in a few years.

Transforming the rocks in the ground into clean energy dominance will not be easy.

Rare earths are the MSG of high technology, added in machines and computers components to boost performance.

For years, China treated its rare earth reserves, about 36 per cent of currently known mineable global reserves, as cheap and ubiquitous.

China became strong in rare earths using the recipe it has for many other industries: state support, cheap labour and little concern over pollution, illegal mining or smuggling.

It mined about 120,000 tonnes of rare earths in 2008. The United States shut the rare earths mine in California, unable to compete against cheap Chinese exports. Markets became used to relying on China.

The recent political ructions may have been an excuse to withhold shipments and prod foreign companies to buy more magnets and other components containing rare earths from China, and even move production there, said some industry analysts.
(Source: Business Standard)

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