Asian countries challenge China on rare earth minerals

Rare earth elements are in great demand

Vietnam and Japan have opened a centre for research into rare earth minerals to challenge China's monopoly of supply.

The elements are crucial for many modern technologies including computers, TVs and wind turbines.

China produces more than 90% of the world's rare earths but has enforced strict export restrictions.

Vietnam, with huge untapped reserves is one of a number of countries gearing up to take advantage of worldwide demand.

One of the countries worst affected by the curtailment of Chinese rare earth exports is Japan. They import around 60% of China's production primarily for use in the electronics and automobile industries.

Tokyo is so concerned about the country's reliance on China in this field that they have been keen to develop alternatives. In 2010 Japan and Vietnam signed an agreement to co-operate in the exploitation of the minerals. Vietnam is reckoned to be in the top ten in the world in terms of rare earth reserves.

Now the two have opened a jointly financed technology centre to help to process and separate the ore with the rare elements then shipped to Japan.

Tim Worstall is a senior fellow at the Adam Smith Institute and an expert in rare earth minerals.

"What's happening with Vietnam and Japan is not in itself a decisive change but it is a symptom of other things going on in the market which are changing the supply from China to non-Chinese sources."

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In March this year, Japan along with the European Union and the US submitted an official complaint to the World Trade Organisation about China's export restrictions. China says that it's curtailed supplies because extracting rare elements from ore is very damaging to the environment.

But according to Tim Worstall, there is another important aspect to China's move that in some ways explains the Japanese interest in forming an alliance with Vietnam.

"What China is said to be doing is reducing the exports so that the people who add the value and produce the expensive pieces of equipment move their production into China, that's something that some people are not happy to do," he explained.

"That's really the background to the Japanese and Vietnamese tie up, yes it gives them an alternative source from China but also gives them a source that's happy to ship them the raw materials rather than ask them to move into their country."

Rare no longer

And in Vietnam there are now projects underway in several countries to improve the exploitation of rare elements that are still crucial for the manufacture of batteries, magnets, mobile phones and other devices.

"There's no shortage of rare earth ore at all and there won't be for several centuries at minimum," Tim Worstall told BBC News.

"There is a shortage of the processing capacity to turn those ores into the individual rare elements but that is also being addressed.

Several commentators expect that in the next few years, the current shortage of the elements will become a glut. Tim Worstall says that the situation is about to change dramatically.

"I can think of three specific projects that I know that are financed and in the next two to three years will supply about 40% of the world market. I think the whole question becomes irrelevant as we get more non-Chinese supplies."