Kazakh nuclear firm and Japan's Sumitomo launch rare earth plant

* Joint venture to produce 1,500 tonnes a year

* Focus on heavy rare earths, Japanese market

* Aims to reduce dependence on China

ALMATY, Nov 2 (Reuters) - Kazakhstan's state nuclear company and Japanese trading house Sumitomo Corp opened a new plant on Friday to produce rare earth metals coveted by technology companies ke e n to break China's stranglehold on global supply.

Summit Atom Rare Earth Co, a joint venture between Kazatomprom and Sumitomo, will produce 1,500 tonnes a year of rare earth oxides at a $30 million plant in the north of the Central Asian republic. Japan will be its biggest market.

Japanese and Western consumers have accelerated the search for alternative supplies since China, which produces over 90 percent of the world's rare earths, said it could sharply reduce exports.

The 17 rare earth elements have a wide range of applications, from smartphones and hybrid cars to glass polishing, luminescent materials, hydrogen storage cells and powerful industrial magnets.

Located in Stepnogorsk, near the capital Astana, the new plant intends to double annual production capacity to 3,000 tonnes by 2015, Kazatomprom said in a statement.

By 2017, it would be capable of producing between 5,000 and 6,000 tonnes per year of rare earth oxides, it said.


Chinese export curbs announced in 2010, which Beijing said were needed to prevent reckless exploitation of its reserves, prompted a rapid spike in prices last year and led consumer countries to file a complaint with the World Trade Organisation.

Prices have since retreated, however, as hot money departed the illiquid sector. Slower economic growth in China, which is also the world's largest consumer of rare earths and may itself become a net importer by 2014, also contributed to the retreat.

China announced a 2.7 percent increase in annual export quotas in August, the first rise in five years.

The Kazakh plant will concentrate on production of heavy rare earth elements, especially dysprosium and other metals used in magnets and electric car motors. Heavy rare earths are much scarcer than their light cousins, such as cerium and lanthanum.

Japan's Yomiuri newspaper, citing unidentified government sources, reported on Friday that Japan could begin importing rare earths from Kazakhstan as early as January.

Initial production of 1,500 tonnes a year at the plant would be equivalent to about 7.5 percent of Japan's annual demand, the Yomiuri said. It said imports from Kazakhstan would include 20 tonnes a year of dysprosium, or 3 percent of Japanese demand.

Kazatomprom said in the statement that the joint venture had signed sales contracts with Sumitomo Corp and two other companies, Japan's Shin-Etsu Chemical Co and French chemicals group Rhodia.

Kazatomprom has previously said the Summit Atom joint venture would process tailings from a disused plant in the western Kazakh city of Aktau. Future cooperation could include exploration for new ore resources.

Kazatomprom owns 51 percent and Sumitomo Corp 49 percent of the joint venture.

(Editing by Mark Trevelyan)