The Japanese government had announced emergency measures on June 3rd 2011 to avoid being held hostage by Chinese price fixing and quotas for rare earth metals crucial to industrial production.
The JPY 30 billion program by the Ministry of Economy, Trade and Industry provides subsidies for development of alternative materials and rare earth recycling technologies. The goal is to prevent Japanese manufacturers of automobiles and electronics from being forced to shift production to China, which mines most of the global supply of the metals, to acquire stable supplies.
To finance the emergency subsidy program, the ministry will use JPY 8.7 billion of the money earmarked for policy measures related to rare earths included in the supplementary budget for fiscal 2010. The program, which will also cover some exotic metals like tungsten, will provide a third to half of the costs of 68 corporate projects, including efforts to develop alternative materials and recycling technologies and curtail rare earth consumption.
A total of about JPY 30 billion will be shelled out for these projects, including the spending by the companies themselves. These research and development projects, if successful, could lead to a significant drop in Japan's imports of rare earth minerals, which are essential for manufacturing a wide range of high tech products, from abrasives used to manufacture hard disk substrates and motor parts for hybrid vehicles.
The ministry hopes the effects of the subsidy program will make it unnecessary for Japanese companies with cutting edge technologies in related industries to shift their manufacturing and development operations to China, where it is easier to secure rare earth supplies.
The ministry's plan also offers financial aid to small and medium sized companies that supply vital auto and electronics parts containing rare earth metals. Disruptions in supplies of such components would cause serious trouble for the domestic operations of carmakers and electronics manufacturers.
Under the program, the ministry will provide support to five companies in areas devastated by the Great East Japan Earthquake to help them restore their operations. Japan consumes 20,000 tonnes to 30,000 tonnes of rare earth metals per year.
The main cause of the sharp rise in prices in recent months is Beijing's move to set minimum prices for their exports. Since late last year, Chinese customs authorities banned rare earth exports priced below its minimum price. China's measures to restrict rare earth exports, which also include export quotas and taxes, have caused difficulties for Japanese manufacturers as Japan depends on China for 80% of its rare earth consumption.
The Chinese government set the rare earth export quota for Japan at 14,446 tonnes for the first half of this year. But Japan's rare earth imports from the country during the first three months of the year came only to 3,500 tonnes, about a quarter of the quota for the six month period through June 2011, as higher prices prompted companies to cut back on imports.
An official at the ministry warns that a fall in Japanese imports below the expected level could lead to a sharp cut in the quota for the second half of the year. The Japanese government has been promoting efforts to diversify the sources of imports of rare earths by securing supplies from countries like Vietnam.
But it will be several years before significant production of rare earth elements starts in other countries. The situation is putting strong pressure on Japanese manufacturers to figure out other ways to reduce their heavy dependence on rare earth imports from China.
(Sourced from www.asahi.com)
