Sumitomo, Mitsui Seek Russian Rare Earths After China Curbs, Governor Says

Mitsui & Co. and Sumitomo Corp. are interested in Siberian rare-earth deposits that weren’t expected to be mined until 2030 as Russia tries to fill the gap left when China slashed exports, Yakutia Governor Yegor Borisov said.

Tokyo-based Mitsui and Sumitomo, Japan’s second- and third- biggest trading companies, have held talks with regional officials about niobium and scandium resources in Yakutia, an area of northeastern Russia the size of India, Borisov said yesterday in an interview.

Prices for rare earths, a group of elements used in products ranging from electric cars and laptops to guided missiles and satellites, have soared since July, when China cut second-half export quotas by more than 70 percent. China accounted for 97 percent of rare-earth output in 2009 and more than half of consumption, U.S. government data show.

South Korea and Japan have begun to go hungry,” Borisov said in the Ural Mountains city of Ufa, where he attended a meeting with President Dmitry Medvedev. “Now there’s good reason to reconsider our position on rare-earth deposits in Yakutia that were scheduled for development after 2030.”

Mitsui and Sumitomo officials in Moscow and Tokyo declined to comment when contacted by Bloomberg. They declined to be identified, citing company policies.

Russia has the largest reserves of rare-earth minerals after China, though production is minimal, according to U.S. government data. The world holds about 99 million metric tons of commercially viable rare earths, with China and Russia accounting for 36 percent and 19 percent, respectively, the Interior Department said in a report last year.

‘Strategic Deposits’

“Our counteragents are taking a broad look at this and aren’t counting on something today,” Borisov said. “They know that we won’t let them have direct access to strategic deposits.’

Japan, the world’s largest consumer of rare earths, has sought alternative suppliers. Foreign Minister Seiji Maehara met with his Russian counterpart, Sergei Lavrov, in Moscow yesterday amid renewed tensions in a 65-year dispute over four islands off the northern tip of Japan.

Yakutia, which has fewer than 1 million people, probably holds “many more” rare-earth deposits than most analysts estimate, Borisov said, declining to be more specific.

Yakutia’s Tontorskoye deposit, which primarily contains niobium, is “many times bigger in volume and quality than Brazil’s famous deposits,” Borisov said.

Outstripping Demand

Brazil is home to the world’s largest deposit of the mineral, used in alloys such as stainless steel for oil and gas pipelines. The Brazilian deposit has enough niobium to meet current world demand for 500 years, according to the Brussels- based Tantalum-Niobium International Study Center.

Global consumption of rare earths last year was about 124,000 tons, 10,000 tons less than production, a difference covered by stockpiles, the U.S. Congressional Research Service said in a Sept. 30 report. Demand will probably reach 180,000 tons next year.

China’s commerce ministry said Jan. 18 that it and other agencies were still considering the full-year export quota. The ministry set the first-half quota at 14,446 tons, a 35 percent decline from the same period last year.

With China continuing to restrict exports, Borisov said he’s in talks with the Federal Subsoil Agency in Moscow about starting auctions for deposits as early as 2014. The agency’s press service declined to comment.

“We’re reconsidering our position,” Borisov said. “We’re trying to determine how much we have now. We’re in the early stages.”

To contact the reporter on this story: Ilya Arkhipov in Moscow at iarkhipov@bloomberg.net

To contact the editor responsible for this story: Willy Morris at wmorris@bloomberg.net.

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