Asia-Pacific News

China Is Blocking Minerals, Executives Say

Keith Bradsher|The New York Times

China’s Commerce Ministry denied on Thursday that it had halted exports to Japan of a crucial category of minerals, but industry executives said that factories in China were still not shipping to Japan after Chinese customs agents blocked shipments earlier this week.

ChinaFotoPress | Getty Images

The minerals are so-called rare earths, which are used in products like wind turbines and hybrid cars.

Eight executives, analysts and traders in the Chinese, Japanese and North American rare earths industries said that China had suspended the shipments on Tuesday in response to a diplomatic dispute over Japan’s detention of a Chinese fishing trawler captain. Some theorized that the action might have been taken by Chinese customs agents, rather than as a formal trade embargo imposed by commerce ministry regulations, to give Beijing more negotiating room with Japan.

Akihiro Ohata, Japan’s trade minister, said on Friday that China’s commerce ministry had informed Japan that it had not issued a ban on rare earths exports. But Mr. Ohata also said the ministry was aware that Japanese traders were complaining of a halt in rare earth shipments from China, and that the government was investigating the matter further.

Gary L. Billingsley, executive chairman of the Great Western Minerals Group, a Canadian company with rare earth processing factories in Michigan and Britain, said China appeared to have stopped shipping rare earths to Japan on Tuesday.

Japanese traders “confirm that there has been a disruption in the supply of rare earths,” Mr. Billingsley said. Shipments loaded before Tuesday have continued to arrive at Japanese ports, he said, adding that Great Western had not experienced any disruption because it bought supplies directly from China.

China mines 93 percent of the world’s rare earth minerals and more than 99 percent of the world’s supply of some of the most prized rare earths, which sell for several hundred dollars a pound.

A Toyota supplier in Japan, who spoke on condition of anonymity, said that the automaker had alerted his company on Monday of a possible halt in rare earth shipments. “Toyota is already seeing shipments being stopped,” the supplier said.

A Toyota spokesman, Paul Nolasco, had no immediate comment.

Industry executives, analysts and two Japanese traders confirmed that rare earths bound for Japan stopped leaving Chinese ports on Tuesday. China has export quotas for rare earths, but even factories with ample quotas for further exports had been dissuaded from making shipments, they said.

“People are mystified why the Chinese don’t acknowledge it,” said Dudley Kingsnorth, the executive director of the Industrial Minerals Company of Australia, a rare earth consulting company.

An official at one of Japan’s top traders in rare earths, who spoke on condition of anonymity, said Chinese customs officials had blocked the rare earth shipments on Tuesday. But because Beijing offices, including customs headquarters, closed Wednesday through Friday for the Chinese Autumn Equinox holiday, and will reopen on Saturday, industry players were still unsure whether the halt in exports was the start of a longer embargo.

Trucking, ports and local customs offices continue to operate during weekends and holidays. But Chinese rare earths operations have halted shipments to Japan for the last three days anyway in response to strong warnings on Tuesday from Beijing officials against selling to Japan, industry executives said.

A person answering the phones at the customs headquarters in Beijing said no one would be available for comment until Saturday.

If China continued to halt shipments, it would be extremely difficult to switch to other sources, the Japanese trader said.

Rare earths are used in a wide variety of industrial applications, including the manufacture of glass, batteries, catalytic converters, compact fluorescent bulbs and computer display screens. Demand has surged in the last decade for clean energy applications, like generators for large wind turbines and lightweight electric motors for cars.

Japanese automakers in particular have been turning to rare earths for the electric motors used in power steering in gasoline-powered cars, as well as the more powerful electric motors that help propel gasoline-electric hybrids like the Prius.

Some industry analysts predicted on Thursday that the Chinese government would relent soon and allow a resumption of rare earth exports to Japan, having made the point that China had considerable economic leverage over Japan these days.

“This is politics. In my view, it won’t last,” said Judith Chegwidden, a managing director of the Roskill Consulting Group in London.

Ms. Chegwidden said that the way China had selectively blocked the rare earths was significant. The halted shipments involved rare earth oxides, rare earth salts and pure rare earth metals — all of which are carefully tracked by customs officials for compliance with government export quotas.

But shipments of various alloys that include rare earth metals to Japan have continued. . These alloys are not subject to export quotas, so they do not receive special attention from Chinese customs officials, and would be hard to stop even if the Chinese government decided to do so.

“They picked on things for which it’s relatively easy because they’ve got a quota,” Ms. Chegwidden said.

Others in the industry said that having China’s customs agency halt exports of rare earths, without calling it an export ban, carried political and legal advantages. Imposing an unannounced embargo, they said, would allow China to ratchet up the pressure gradually on Japan to release the detained boat captain.

And a halt in exports carried out through administrative measures, rather than as an act of official policy, would be much harder for Japan to challenge at the World Trade Organization, which bans most unilateral export restrictions. Under W.T.O. rules, countries may formally suspend exports of natural resources only for environmental conservation.

Hiroko Tabuchi contributed reporting from Tokyo.