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ANALYSIS - Japan, Germany seek rare earth recycling as hedge

Source : REUTERS
Last Updated: Wed, Nov 10, 2010 09:10 hrs
ANALYSIS - Japan, Germany seek rare earth recycling as hedge

/BERLIN (Reuters) - Japan and Germany are waking up to the idea of recycling rare earths as a hedge against China's tightening grip on supplies crucial to their large high-tech export industries.

The question is whether they can come up with ways to do it cheaply enough.

China produces 97 percent of the world's rare earth metals but has curbed exports, notably to Japan but also the United States and Europe.

"Recycling can't be implemented immediately as it takes time for it to be a viable business. But there is no doubt it has to be done," said Naohiro Niimura, a partner at Tokyo-based research and consulting firm Market Risk Advisory Co.

"The way prices are rising, they may pay off the cost of recycling to help it become a means of stable resources procurement," he said.

Germany's cabinet last month approved a new commodities strategy aimed at helping industry secure supplies. Japan is considering a stockpile and announced measures to help firms shift away from or recycling rare earths.

"The most important domestic source of raw materials is more recycling," said German Economy Minister Rainer Bruederle last month. "We need to utilise the valuable potential of our own residual waste." Germany imports raw materials worth about 80 billion euros ($111.6 billion) each year.

Concerns about China's squeeze on a raw material so vital to electronics and auto parts, industries in which Japan and Germany are major players, have pushed up prices sharply, catching buyers off guard.

Japan, which accounts for 56 percent of China's exports of the rare metals, has also been stepping up research and development of recycling rare earths, with one firm earlier this month discovering a technology that can recover rare metals.

HIGH COST A MAJOR HURDLE

The biggest hurdle, say analysts, is the high cost of recycling.

German companies have only begun talking of the need for recycling rare earth metals in the past month.

"It's difficult to say how much could be recycled in Germany. If the percentage rises to 10 percent in five years that would be a very good achievement," said Harald Elsner, a senior geologist at the Federal Institute for Geosciences and Natural Resources.

Germany's current recycling rate is around 1 percent.

"The prices have been so low that rare earths could not be recovered cost-effectively with recycling. The rising prices will raise the incentive for recycling as well as research activity in recycling," said an official at the BDI German Industry Federation.

Japan is thought to have only one or two facilities left that are able to recycle rare earths from scrap -- a costly process already passed to China, industry sources say.

"It is very costly to collect and accumulate scrap for recycling. Merits of scale don't work with these metals," an official at the Japan Metal Economics Research Institute said.

To be cost-effective in Japan, the price of rare earth metals would have to rise 10-fold.

Over the past five years, the price of neodymium, used in such products as computer hard disks, has risen about six-fold and that for dysprosium, used in data storage devices, eight-fold.

RESEARCH TO THE RESCUE

New research, however, has come up with potential ways to make the process much cheaper.

Toru Okabe, a University of Tokyo professor, recently succeeded in separating rare earths elements from neodymium magnet via a new recycling process.

Morishita Jintan Co, a maker of health and hygienic products, said earlier this month it has developed microbe-filled capsule technology jointly with Osaka Prefecture University, which can recover rare metals such as palladium and indium.

When the capsules are placed in a medium containing rare metals, they help microbes absorb the metals, a company spokesman said. He said Morishita Jintan aimed to commercialise the technology in less than five years.

The spokesman said it was too early to say if the technology can also detect other types of rare metals including rare earths.

"If the technology is proven to be applicable universally to all types of rare metals, it will greatly help enhance the recovery of rare earths and make their recycling cost-effective," an official at Japan Society of Newer Metals said.

CHALLENGING PRICE SUSTAINABLITY

To reduce dependence on China, Japan has struck agreements with Vietnam, India and Kazakhstan to explore and develop mineral resources including rare earth minerals.

Germany will seek bilaterial commodities partnerships with raw material producing countries, coordinating foreign, industrial and development aid policies, while industrial firms were urged to set up a German raw materials company, to find and secure rare earths.

Achim Steiner, executive director of the UN Environment Program, has called for a global drive to recycle rare earth metals, warning that supplies of rare earths may be exhausted within 40 years.

While analysts say recycling is not an immediate cure for supply shortages, surging prices could taker their toll.

"At some point, companies will no longer absorb rising costs. Their problems will weigh on the economy and attempts to sustain high prices will not work," said Takeo Okuhara, a fund manager at Daiwa SB Investments.

(Editing by Jonathan Thatcher)




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