Media reports about a Chinese clampdown on rare earths shipments to Japan and the European Union (EU) will, in all likelihood, permanently alter the global rare earths logistics scenario.
Major importers Japan and South Korea are now seeking alternative sources of the rare earths needed in vast quantities for their staple high-tech industries.
Nikkei Business Daily reported on Friday a Japanese delegation led by Prime Minister Yukio Hatoyama will travel to Vietnam to discuss a tie-up with the southeast Asian nation to develop rare earths resources.
According to Bloomberg, South Korea has plans to team up with Japan and the United States to jointly develop alternative rare earths resources in the face of possible export tightening by China which produces as much as 97 percent of rare earth elements globally.
Japan is particularly sensitive to China's export policies as more than half of total Chinese rare earths exports go to Japan currently.
According to reports, China blocked rare earths exports to Japan following a diplomatic standoff which resulted from Japan's arrest of a Chinese fishing boat captain near the disputed Senkaku Islands last month.
Rare earths are indispensable for high-tech industries and are heavily in demand in defense systems, electric cars, wind generators, hard-disk drives, mobile communication, missile guidance and the like. Technically viable alternatives to rare earth materials are not known currently.
Though China has denied cutting off access to rare earths sources, there have been clear indications in the air that Beijing could recalibrate its rare earths policy on several grounds.
Chen Zhanheng, Deputy Director of the Office of the Chinese Society of Rare Earths, wrote in a report in April this year a tightening of Chinese rare earths export policy will stimulate changes in the world's rare earths industry and that there was a need for investment in new projects globally.
He said the government could seriously think of recalibrating the rare earths export policy given the dependence of modern high-tech on the rare earths.
The main purpose of China rare earth industry policy is to protect the environment, to change the situation of scatter, disorder, and small scale of China rare earth enterprises, so as to elevate the prices of rare earth products to a reasonable range. Chen wrote.
I think China will moderately control but will not prohibit the export of rare earth products, China will also take care of the demand for rare earths worldwide by adjusting the quotas of rare earth supply to an appropriate range.
Chen also points out that consumption of rare earths products in China has already reached 60 percent of total production. However, Chen notes that the development of China's rare earth industry will largely depend on international demand.
Rare earths consumption in China increased rapidly since 2004. Between 1978 and 2007, Chinese annual consumption rose from 100,000 tonnes to 726,000 tonnes. Chinese consumption surpassed 50 percent of the total global consumption in 2005.
It is estimated that the demand of rare earths is expected to touch 210,000 tonnes by 2015 and that Chinese domestic demand will be 138,000 tonnes.
Chen also notes that though China put in place export control in 1999, the total exports did not decrease generally until 2007.
The gross volume of exports had been in a growth trend and reached a record of 57,400 tons in 2006, and then declined in 2007 and 2008, he writes.
As of 2005, China had a proven rare earths reserve of 67.80 million tonnes, or about 55 percent of the total global reserves.