Q & A Japan’s rare earth market

July 14, 2011 (Source: Reuters) — Higher prices of rare earths from China, which controls 97 percent of global supply of the material used in batteries and high-powered magnets, have hit Japan hard, driving users to hunt for alternatives and reduce usage.

Trading houses estimate Japan’s rare-earth products market will shrink 30 percent in 2011 to around 23,000 tonnes.

Here are some facts about the rare earths market in Japan, the world’s biggest importer of the 17 metals.

* HOW ARE RARE EARTHS USED IN JAPAN AND HOW ARE HIGH PRICES AFFECTING THE MARKET?

— Demand is falling sharply for such rare-earth products as polishing powder and nickel metal hydride batteries as companies review their use and new technologies emerge.

— High-power magnets and auto exhaust catalysts are now the two major applications for rare earths in Japan, each accounting for a fifth of Japan’s rare-earth product market. Demand for the two products remains steady at 4,500-5,000 tonnes a year each despite companies’ efforts to cut consumption, due to rapid expansion of the auto and electronics markets.

* WHO ARE THE USERS OF HIGH-POWER MAGNETS?

— The biggest users of such magnets are makers of hard disk drives. They are also used by makers of consumer electronic appliances such as mobile phones, audio equipment and personal computers. Apart from hybrid cars, carmakers use them in items including windscreen wipers and power windows.

* WHO ARE THE TOP PRODUCERS OF HIGH-POWER MAGNETS?

— The three top sintered magnet producers are Hitachi Metals , which has 45 percent of the market, followed by Shin Etsu Chemical with 40 percent and TDK with 10 percent. Hitachi Metals’ patents on light and powerful magnets that use dysprosium and neodymium will expire in 2014.

— In the supply chain, rare earths imported by trading houses, mainly Sojitz Corp and Sumitomo Corp , are sold to four top rare earth magnet alloy makers — Shin Etsu Chemical, Sojitz affiliate Santoku, Showa Denko and Chuden Rare Earth. The alloy is sold to the sintered magnet producers.

* WHO PRODUCES AUTO CATALYSTS?

— Auto catalysts, which control automotive gas emissions, are bought by carmakers from global giants such as Johnson Matthey , BASF group (BASFn.DE), Belgian group Umicore and Toyota unit Cataler Co.

— Japan’s Daiichi Kigenso Kagaku Kogyo is a major supplier of rare-earth compounds to catalytic converter makers.

* WHO ARE USERS AND SUPPLIERS OF RARE-EARTH POLISHING POWDER?

— Cerium abrasives are mainly used for polishing glass for liquid crystal displays, hard disks and flat panel TVs. Asahi Glass is alone among the world’s top LCD glass producers in using the abrasives in its production process. Top maker Corning uses a different production method.

— Japan’s consumption of cerium abrasive is expected to plunge 75 percent in 2011 to 3,500 tonnes as companies are re-using the polishing powder up to five times and looking to use alternatives such as zirconia compounds and ferric oxide.

— Showa Denko is Japan’s top producer of cerium abrasive, holding 40 percent of the domestic market, followed by Mitsui Mining and Smeltering and unlisted Taiyo Koko.

* HOW ARE NEW TECHNOLOGIES AFFECTING RARE-EARTH USE?

— Nickel metal hydride batteries for hybrid cars, digital cameras and toys are increasingly being replaced by lithium ion batteries, and demand for the product is expected to fall 10 percent to 3,500 tonnes in 2011.

— A rapid shift to energy-saving LED lamps is replacing fluorescent bulbs and fluorescence used in TVs.

— Companies are also cutting down on the use of less-important products such as ultra-violet ray reducing glass for automotive glass and optical glass used in medical equipment.