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High Rare-Earth Prices Force Hitachi, Toyota to Find Alternative

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High Rare Earth Prices Force Japan Buyers
Neodymium is displayed at a factory in Baotou, Inner Mongolia, China. Neodymium has jumped 62 percent to $450 a kg. Photographer: Nelson Ching/Bloomberg

Aug. 29 (Bloomberg) -- Japanese rare-earth buyers are switching to quarterly sales contracts and looking for alternative sources after China curbed shipments, increasing prices for the materials used in hybrid cars and missiles.

Prices have increased by as much as three times since May, hurting companies such as Hitachi Metals Ltd., which makes magnetic and electronic materials, said Shinya Yamada, a Tokyo-based analyst at Credit Suisse AG. Higher costs may drive users to avoid applications based on the 17 chemically similar elements entirely, Yamada said.

China produces more than 90 percent of the world’s rare earths, used in Apple Inc. iPads, Boeing Co. helicopter blades, Raytheon Co. missiles, Toyota Motor Corp. hybrid cars and wind turbines. The nation has curbed output and exports since 2009, saying it wanted to conserve resources and protect the environment. Japan is the top buyer of rare earths.

“China changed its strategy from limiting export quotas to tightening regulations for digging and refining,” Fujinori Sato, deputy manager at the electro materials section of Sojitz Corp., said Aug. 25. “Prices may go up further later this year.”

Dysprosium and neodymium, used in automotive and wind-power applications, soared more than threefold since May to $3,500 per kilogram and 62 percent to $450 a kilogram respectively, according to Sojitz data. Trading houses Sojitz and Sumitomo Corp. import most of Japan’s rare-earth requirements.

‘Beyond Expectation’

“The prices have jumped beyond our expectation and the current levels will worsen our earnings,” said Takakazu Momozuka, general manager of the financial and accounting department at TDK Corp., a major Japanese producer of power supplies, transformers and magnets.

Processors will switch to quarterly based sales contracts from six-month contracts in October with users such as automakers and electronics makers because of soaring prices, said Kenichi Nishiie, a spokesman at Hitachi Metals.

China’s output of dysprosium is about 500 metric tons a year and combined demand between China and Japan is about 2,500 tons a year, Sojitz’s Sato said. The trading house has been investing rare-earth mines in Australia and Brazil.

China’s policies on exports of rare earths don’t violate World Trade Organization rules and the nation will appeal a finding that its export controls over raw materials violate global rules, Shen Danyang, spokesman for the Ministry of Commerce, said on Aug. 24.

WTO Ruling

Xinhua news agency said on July 6 the Chinese government was evaluating the report of a WTO panel released the previous day that found duties and quotas on the export of raw materials violate global trade rules.

To cope with surging prices, Shin-Etsu Chemical Co. plans to raise its procurement rate of raw materials from recycling to 30 percent from 10 percent, spokesman Tetsuya Koishikawa said. TDK will cut the usage of rare earths in its magnet products by 50 percent from next year and sell those products free from rare earths after five years, Momozuka said.

Aichi Steel Corp., which buys all its requirements from China, plans to increase purchases from South Africa to reduce its dependency to 50 percent, said Yoshinobu Honkura, senior managing director of the company, which is 23.7 percent owned by Toyota Motor.

Toyota is developing an alternative motor for future models and electric cars that doesn’t need rare earths. Toyota engineers are working on a so-called induction motor that’s lighter and more efficient than the magnet-type motor now used in its Prius, company spokesman John Hanson said in January.

China Minmetals Non-Ferrous Metals Co., a rare-earth producer owned by the nation’s biggest metals trader, has halted production to meet government requirements to limit output. The company also called for domestic producers to voluntarily stop output from early August to ensure a stable rare-earth market and to protect China’s strategic resources, it said on Aug. 2.

To contact the reporters on this story: Jae Hur in Tokyo at; Ichiro Suzuki in Tokyo at

To contact the editor responsible for this story: Richard Dobson at

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