Japan secures access to Mongolian REEs in FTA

OREANDA-NEWS.  Japan signed a free trade agreement (FTA) with Mongolia on 10 February that will open up trade between the two countries and give Japan access to Mongolia's natural resources such as rare earth elements (REEs) and coal.

The signing of the FTA follows discussions that began in 2012 and a basic accord that was reached between Japan and Mongolia in July last year.

Under the conditions of the FTA, Mongolia has assured Japan of secure and stable access to its natural resources such as REEs and coal. Mongolia will abolish tariffs on most Japanese vehicles in 10 years, while Japan has agreed to scale back tariffs on Mongolian imports over the same period. In addition, the FTA will open more opportunities for Japanese investment in Mongolia's mining industry. The new trade relationship is also likely to be beneficial to Japan in its negotiations with North Korea over Japanese abductees.

Since China tightened quotas on its REE exports in 2010, Japan has looked to countries such as Australia, Mongolia and India to diversify its REEs imports beyond China to ensure supply security.

In 2011, Japan's Sojitz invested \$250mn in the Lynas Rare Earths project in Mount Weld, western Australia to secure supplies of REEs for the Japanese market. The agreement covers supplies from Lynas of a minimum of 8,500 t/yr, with flexibility to add or remove 500 t/yr, for a period of 10 years. In September 2014, Japan and India began discussions on a REEs supply agreement with exports to be supplied by Irel, India's only rare earths producer.

While China lifted its REE export quotas on 1 January, the central government has introduced new export licence regulations and has decisions pending for 2015 REE production quotas and changes to its resource tax on REE production. The new resource tax will replace the export tariffs on REEs that Beijing has agreed to lift on 2 May, in accordance with World Trade Organisation regulations.