September 24, 2010 / 6:41 AM / 7 years ago

Japan trade min hears China rare earth exports halted

TOKYO (Reuters) - China's trade ministry has told exporters of rare earth metals to halt shipments to Japan, Japan's trade minister said on Friday, citing information from importers.

But Beijing has told Tokyo there was no official embargo, Akihiro Ohata, head of the Ministry of Economy, Trade and Industry (METI), told reporters on Friday.

The comment comes after a New York Times report that China has banned exports of rare earth metals to Japan, amid escalating tensions between Asia's two largest economies.

The two sides are locked in a dispute over Japan's detention of a Chinese fishing boat captain whose trawler collided earlier this month with a Japanese patrol boat, while Japan confirmed on Friday that four Japanese nationals had been detained in China on suspicion of violating Chinese law.

"China has not done anything like an official embargo. That's what we've heard from China's trade ministry," Ohata said.

"We've heard from trading firms that is happening, so we're checking what's going on," he said, referring to the reported rare earth export halt.

Rare earth elements have a variety of technological and industrial applications, including in batteries, computers and weapon systems.

"We've heard that there is no suspension upon any other country. This is only my guess yet, but I suspect the island dispute might have affected (the situation)," Ohata said at a regular news conference.

China accounts for about 97 percent of the world's total production of rare earth elements, about half of which is exported to Japan.

It is unclear whether the rare earth halt is the result of action by the Chinese government, or because businesses are closed from Wednesday to Friday this week and again from October 1-8, Japanese rare earth traders told Reuters.

They added operations in the first part of next week could shed more light.

"It is fact that there is a delay in several shipments," an official at rare metals trading firm Advanced Material Japan said.

CHINA ON HOLIDAY

Ohata, citing some Japanese trading companies, said that Chinese exporters told the companies they were instructed to suspend making new contracts or shipments.

Ohata also said that a system at China's trade ministry to issue export licence has been suspended so Japanese trading companies are unable to make new applications.

An official at Mitsubishi Corporation Unimetal said that up to September 21, shipments were as normal, but because of holidays in China they company has been unable to confirm whether shipments will continue as normal.

China has been on the Mid-Autumn Festival holiday from September 22-September 24.

"We won't know until Monday when business is supposed to return to normal," he said.

Another trading firm said rare earth shipments have stopped since September 21.

End-users such as Showa Denko K.K. and Taiyo Koko Co said they have not heard anything related to the suspension of exports from trading firms which import rare earths for them.

"Exporters are on holiday and customs may also slow or halt during such an extended period of holidays. The timing is very good to stir concerns, but there is no clear correlation to tie the situation," one industry source said.

A Chinese trade official on Thursday denied the New York Times report.

The report, sourced to unnamed industry experts, said an initial trade embargo on all exports of rare earth minerals would last through the end of this month.

Japan may act if necessary if there is an embargo by China, METI minister Ohata said.

"I understand such a move would not be allowed under WTO rules. So, we should check the facts and then act in line with the WTO rules," Ohata said.

Additional reporting by Tim Kelly and Kentaro Hamada; Editing by Michael Urquhart

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