Japan Further Diversifies Rare Earth Supplies Through Agreements, Discovery

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Due to a reshuffle of convertible bonds, Mitsubishi UFJ Financial Group Incorporated's (NYSE:MTU) (Tokyo) share in Lynas Corporation Limited (ASX:LYC) (Sydney) has been boosted to 10.3%. Lynas is well known for the development of a stable rare earths mine-to-market supply, while Japan is one of the largest rare earths importers in the industry. Rare earths are used to make a variety of products vital to modern technology, from wind turbine batteries to refinery catalysts.

Lynas is currently in the midst of constructing a rare earths processing plant in Malaysia, though the company has run into a snag as government protests have roused the International Atomic Energy Agency to recommend revisions to the plant's specifications. Before any further licensing can be allowed, Lynas must provide a detailed plan for long-term waste management, the primary concern of the Malaysian government. This could delay the project by a few months, but Lynas plans to have the plant operational by the beginning of 2012, with raw material originating from Lynas' rare earth mine in Australia.

Japan, which imports the majority of Lynas' processed rare earths, has been diversifying away from dependence on China's rare earths exports. Diplomatic tensions rose last year between China and Japan, lending to a halt in exports to Japan. Exports have resumed, though they have been inconsistent, jumping as much as 40% in March, only to taper off significantly again. A number of rare earths plans have emerged since last year's diplomacy issues, including projects in both Vietnam and India. Sojitz Corporation (TYO:2768) (Tokyo), which is involved with the development of the rare earths processing plant in Vietnam, signed a supply agreement with Lynas last year. Under the agreement, nearly half of Lynas' production would be supplied to the Japanese market over the next 10 years.

Japan has also recently found a new source of rare earths that may allow for a more domestic supply of rare earths. A research team, partially comprised of members from Tokyo University, has discovered deposits of rare earths in sections of ocean floor in the Pacific. The goal is to develop larger deposits in order to steady unstable supply fears and the possibility of high prices.

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