Sony: China rare earths quota hinders free trade

Japan's Sony Corp said China's move to cut export quotas for rare earths was a hindrance to free trade and that it would work to reduce its reliance on the minerals crucial to producing high-tech goods.

Sony's comments follow China's announcement that it will effectively lower its export quotas for rare earth minerals by 35 percent in the first half of 2011, raising concerns of a supply shortage and higher prices.

While Sony does not import or buy rare earths directly, the minerals are crucial for the production of components used in its finished products. These include magnets, condensers, and abrasives for polishing LCD glass, company spokeswoman Ayano Iguchi said.

"We cannot welcome rare earth export controls or any restrictions that hinder the system of free trade," Sony said in an email statement in response to questions by Reuters.

"At this point in time there is no direct impact on our company. But further restrictions could lead to a shortage of supply or rise in costs for related parts and materials. We will watch the situation carefully."

Sony, maker of Bravia brand flat TVs, Vaio PCs and the PlayStation 3 videogame console, will look for ways to cut its use of rare earths, including developing alternative materials, Iguchi said.

China accounts for 97 percent of the world's production of rare earths and Japan, home to many of the largest auto and high-tech manufacturers, counts on China for the bulk of its supplies.

Japanese firms have been scrambling to develop alternative technologies and secure new sources of rare earths after China cut quotas this year and shipments temporarily stalled in a move some believe was triggered by a territorial dispute.

Among recent deals, Sumitomo said it would invest US$130 million in Molycorp, which owns a rare earth mine in California, and another trading house, Sojitz, signed a procurement deal with Australia's Lynas.

Japan's trade minister, Akihiro Ohata, told reporters on Tuesday he believed Japan would still be able to secure enough rare earth supplies in 2011 even after China's quota cuts, but said the situation would need further study.

Ohata's comment was based on the assumption that the expected amount of imports in the first half of 2011 would be roughly equal to the average of imports for the first and second halves of 2010, a spokeswoman for the ministry said.

But Sojitz, according to the Nikkei newspaper, has estimated that if China were to hold quotas to 30,000 tonnes for all of 2011 -- roughly double the projected amount for the first half -- supplies to Japan would fall short of its annual needs by about 11,000 tonnes.

No one at Sojitz could be reached for comment.

(Reporting by Nathan Layne; Editing by Michael Watson)