Nikkei reported that Sumitomo Corporation has decided not to take a stake in Molycorp Inc, possibly impacting Japan's supply of materials critical to electronics and other technology.

Under a basic agreement reached in December 2010, the trading house would have purchased USD 100 million or some JPY 7.7 billion of new shares issued by the Colorado based company.

Sumitomo would also have lent Molycorp USD 30 million as well as procured 3,250 tonnes of rare earths a year from Molycorp from 2013. But the two sides apparently failed to work out a deal on a purchase price commensurate with the quality of the metals.

Molycorp set up a Japanese subsidiary in August 2011 and will likely supply rare earths to Japan on its own. But reduced involvement by trading houses could make it difficult for Japanese companies to secure stable supplies in terms of both volume and price.

Molycorp's Mountain Pass mine in the state of California is the largest rare earth deposit outside of China, producing cerium and lanthanum, among other materials.

(Sourced from Nikkei Business Daily)