Japan seeks alternative supplier of rare earth metals, shoring up supply chain

Rare earth metals are vital to the manufacturing of electronics and automobiles. China accounts for more than 90 percent of global production, but is an unreliable supplier: it recently cut off shipments to Japan amid diplomatic tension. To prevent further supply chain disruptions, Japan moved to bypass its reliance on China, reaching an agreement with an Australian miner.

The unofficial Chinese embargo of Japan lasted two months and caused major headaches among Japan's high technology manufacturing sector. Sojitz, a top Japanese trading company, forged a deal worth $250 million with Lynas, an Australian mining company. Next year, Lynas will begin shipping the metals to Japan, with plans to send 3,000 tons in 2011 and 9,000 tons by 2013.

The supply chain disruptions that Japanese companies faced hurt their manufacturing capacity and caused delays in the delivery of goods. Satoshi Mizui, a senior vice president at Sojitz, affirmed that the ultimate goal of the pact is to "secure a stable supply of rare earths to Japan." Echoing Mizui's sentiment, Hiroshi Katano, manager of the section overseeing rare earths trading at Sojitz, asserted that because "outlook for stable rare earth supplies from China remains uncertain," it was necessary "to develop other sources."

Sojitz expects the supplies from Australia will increase supply chain efficiency and prevent further business interruptions, but fears remain as China dominates in the worldwide production of the essential metals.