Japan Signs Deal With India on Rare Earth Production, Supply

Japan signed an agreement to import 4,100 tons of rare earths a year from India in its second deal this month to diversify supply from China for the metals used in mobile phones and hybrid cars to missile guidance systems.

Japan, the world’s biggest importer of rare earths, signed a memorandum of understanding in Tokyo today for India to supply as much as 20 percent of the country’s rare earth imports, according to a briefing by the Ministry of Economy, Trade and Industry. On Nov. 2, Sumitomo Corp. (8053) opened a rare-earth processing plant in Kazakhstan that will produce 3,000 metric tons by 2015.

Under the agreement today, Toyota Tsusho Corp. (8015), a Japanese trading company, will set up a joint venture with India Rare Earths Ltd. Production and supply will start next year.

The moves come as China, the supplier of more than 90 percent of the world’s rare earths, sets lower export quotas for the metals. Rare earths are a group of 17 chemically similar elements identified by the U.S. Defense Department this year as critical to the operation of military equipment.

Japan Oil, Gas and Metals National Corp. will join the venture in India, Yuko Yasunaga, an official of the industry ministry said, adding that other companies from India and Japan may also take part.

Rare earths became a political issue after China cut domestic output and exports in July 2010 by 40 percent, which caused prices to double for some rare earths. The move soured ties with major users including the U.S. and Japan.

Japan will get 9,000 tons a year of rare earths from Australia’s Lynas Corp. and 10,000 tons per year from Molycorp Inc. (MCP) of the U.S. in the second half of next year, according to Yasunaga.

To contact the reporter on this story: Chisaki Watanabe in Tokyo at cwatanabe5@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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