Amid Strained Trade Relations with China, Japan Strikes Rare-Earths Deal with Vietnam

Experts warn that rare-earth rarity could touch off trade wars

Rare Earth Exports Held at Chinese Loading Docks

Though Chinese officials deny it, sources in the industry say Chinese exports of critical rare earth elements bound for the U.S. and Europe are being held up by customs officials in China.Pete via Wikimedia

In the midst of what's been shaping up as an undeclared rare earths standoff between China and some of it's biggest customers in Japan and the West, Vietnamese and Japanese leaders have decided to collaborate in the exploitation of northern Vietnam's rare earth elements. The deal was hammered out between the two nations' prime ministers during a meeting on Sunday.

Back in September it was reported that Chinese customs officials had halted shipments of rare earths elements to Japan though no official embargo was declared by the Chinese government. Two weeks ago it was further reported that China had expanded the rare earths suspension to include the U.S. and Europe. China exports more than 95 percent of the world's supply of rare earth elements, which are necessary materials for the manufacture of a vast variety of modern goods, ranging from hybrid car engines to wind turbines to weapons systems to personal electronics.

Japan's decision to seek out non-Chinese sources of rare earths comes as the Geological Society of America considers the role of rare earths in an alternative energy future at the group's annual meeting on Tuesday. In a paper that will be presented tomorrow, geologist point out that rare earth elements and other scarce metals are the backbones of alternative energy tech like photovoltaic cells, wind turbine magnets, high-capacity battery tech, and fuel cells.

Because the U.S. hasn't tapped its domestic resources of rare earths – and won't be able to produce an independent supply chain for at least fifteen years according to GAO estimates – any shift to an alternative energy economy would simply trade one foreign dependency for another. That could set the stage for trade wars as China needs more of its neodymium, gallium, zinc, lithium, and various rare earth elements to pursue its ambitious alternative energy plans.

Japan will help the Vietnam explore and survey its northern provinces for future rare earth element exploitation and help the Vietnamese develop environmentally friendly technologies for extraction and processing of the elements, but at best it would be a few years before meaningful production and export would begin. The U.S. will keep seeking out rare earths at home and keep leaning on China to keep the exports coming. And global economies will keep its fingers crossed that China does so.