India-Japan Rare Earth Deal: Over to You, China

Japan has sealed its new “friendship” in the world of rare earths by formally signing a Memorandum of Understanding (MoU) with India for imports of rare earth (REE) minerals annually.

The agreement signed last Friday will allow Japan to import about 4,100 tons of rare earths per year from India, probably from next spring.

Once upon a time, Japan used to rely almost 100% on China for its supply of rare earth minerals, a crucial component in mobile phones, hybrid cars and missile guidance systems.

The imports from India will take care of about 10 percent of Japan’s peak annual demand. A joint venture between Japan’s Toyota Tsusho Corp. and India’s state-run Indian Rare Earths Ltd. will be in charge of monitoring the new deal.

A statement by India’s external affairs ministry released subsequent to the signing of the deal said the conclusion and signing of the agreement would further enhance and strengthen the India-Japan strategic and global partnership.

The MoU was supposed to be signed during Indian Prime Minister Manmohan Singh’s visit, which was canceled at the eleventh hour after the Japanese government decided to dissolve the lower house of parliament for an election next month. Instead, it was inked by Japanese Foreign Minister Koichiro Gemba and India’s Ambassador to Japan Deepa Wadhwa in Tokyo.

According to a report in The Indian Express, Japan was well on its way to diversifying its sources of rare earths from China. Outside of India, Tokyo expects to get half its supplies of the elements from countries other than China from the middle of next year, according to Trade Minister Yukio Edanor.

The Japanese moves come after China had held back some shipments of rare earth elements over a year ago following tension between the two neighbors over the disputed ownership of a string of small islands in the East China Sea.

By Sohrab Darabshaw