Rare Earth Stocks

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Sumitomo, Mitsui Hold Rare-Earth Talks With Russia as China Limits Supply
By Ilya Arkhipov - Feb 11, 2011 8:25 AM ET

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Sumitomo Corp. and Mitsui & Co. are in talks to mine rare-earth deposits in Russia as the country seeks to compete with monopolist China, Yakutia Governor Yegor Borisov said.

“Mitsui and Sumitomo have expressed interest in producing niobium and scandium in Yakutia,” Borisov said in an interview today in the Ural Mountains city of Ufa, where he was attending a meeting with President Dmitry Medvedev. “They know this is the future.” Sumitomo and Mitsui officials in Moscow and Tokyo declined to comment.

Prices for rare earths, a group of elements that are used in products ranging from electric cars and laptops to guided missiles and space satellites, have soared since July, when China said it would cut export quotas by more than 70 percent. China accounted for 97 percent of the rare-earth output in 2009 and more than half of consumption, U.S. government data show.

Yakutia, a region about the size of India with less than 1 million people, probably holds “many more” rare earth deposits than most analysts estimate, Borisov said, declining to be more specific. Russia holds the largest reserves after China, though production is minimal, according to U.S. government data. The world holds about 99 million metric tons of commercially viable rare earths, with China and Russia accounting for 36 and 19 percent, respectively, the Interior Department said in a report last year.

Global production of rare earths last year was about 124,000 tons, 10,000 tons less than output, a difference covered by stockpiles, the U.S. Congressional Research Service said in a Sept. 30 report. Demand will probably reach 180,000 tons next year, continuing to outstrip output.

With China continuing to restrict exports, Borisov said he’s in talks with the Federal Subsoil Agency in Moscow about starting auctions for deposits as early as 2014, rather than the current target of 2030. The agency’s press service declined to comment immediately.

“We’re reconsidering our position,” Borisov said. “We’re trying to determine how much we have now. We’re in the early stages.”

To contact the reporter on this story: Ilya Arkhipov in Moscow at [e-mail]

To contact the editor responsible for this story: Willy Morris at [e-mail].