Bach Seat

Problems with Chinese supplies of rare earths have sent the Japanese in search of alternative sources. The search has created opportunities in what Japan refers to as urban mining. The New York Times reports that Kosaka Japan, a town of 6,000 is a leader in urban mining. Urban mining is recycling valuable metals and minerals from the country’s huge stockpiles of used electronics like cellphones and computers. “We’ve literally discovered gold in cellphones,” Tetsuzo Fuyushiba, a former land minister told the NYT.

Why urban mining

Kosaka’s pursuits have become especially important for Japan since China recently started to block exports of all rare earths to Japan, the NYT reports. This has caused concerns at Japanese manufacturers, from Toyota to tiny electronics makers. The raw materials are crucial to products as diverse as hybrid electric cars, wind turbines, and computer display screens. In Kosaka, Dowa Holdings (DWMNF) which has mined the area from 1884 until 1990, has built a recycling plant. The 200-foot-tall recycling furnace renders old electronics parts into what the NYT describes as a molten stew. From the stew, valuable metals and other minerals are extracted. The salvaged parts come from around Japan and overseas, including the United States.

Dowa’s subsidiary, Kosaka Smelting and Refining, has so far successfully reclaimed gold and rare metals. They have recovered indium, used in liquid-crystal display screens, and antimony, used in silicon wafers for semiconductors. The New York Times reports that the company is trying to develop ways to reclaim the harder-to-mine minerals.

The hard to mine minerals include rare earths — like neodymium, a vital element in industrial batteries used in electric motors, and dysprosium, used in laser materials. The National Institute for Materials Science, says that used electronics in Japan hold an estimated 300,000 tons of rare earths. That amount is tiny compared to reserves in China. China mines 93 percent of the world’s rare earth minerals, Tapping these urban mines could help reduce Japan’s dependence on its neighbor, analysts say.

Expensive and technically difficult

Dowa has emerged as the field’s early leader. “It is important for Japan to actively tap its urban mines,” said Kohmei Harada, a managing director at the National Institute of Materials Science told the NYT.  Apart from rare metals and earths, Mr. Harada estimates that about 6,800 tons of gold, or the equivalent of about 16 percent of the total reserves in the world’s gold mines, lie in used electronics in Japan. “Japan’s economy has grown by gathering resources from around the world, and those resources are still with us, in one form or another,” he said.

But this form of recycling is an expensive and technically difficult process. It is still being perfected. At Dowa’s plant, computer chips and other vital parts from electronics are hacked into two-centimeter squares. This feedstock is smelted in a furnace that reaches 1,400 degrees Celsius before various minerals are extracted. The factory processes 300 tons of materials a day. Each ton yields only about 150 grams of rare metals.

Urban mining cell phone speakers

Dowa has turned its attention to developing ways to render neodymium, which is used in powerful magnets. Its extraction has proved costly. Neodymium is found in tiny quantities in the speakers of cellphones. That makes it a challenge to collect meaningful amounts, said Utaro Sekiya, the manager of Dowa’s recycling plant. Finding enough electronics parts to recycle has also grown more difficult for Dowa, which procures used gadgets from around the world. A growing number of countries, including the United States, are recognizing the value of holding onto old electronics. And China already bans the export of used computer motherboards and other discarded electronics parts.

China’s hoarding of rare earths

The global rare earth market is small by mining standards, just $1.5 billion in 2009. However, their value is rising as prices have surged in response to Chinese restrictions on exports. The NYT says that concern over China’s hoarding of rare earths has also been spreading to the United States. In late September 2010, the House of Representatives approved  H.R. 6160, the Rare Earths and Critical Materials Revitalization Act of 2010.

The bill authorized research to address the supply of rare earth minerals, which are vital to applications in fields such as energy, military, electronic, and manufacturing technologies.“We must take steps to recapture our technological lead in a wide range of industries critical to our economic health, our national defense, and a clean and secure energy future,” said Committee on Science and Technology Chairman Bart Gordon (D-TN).

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The late Chinese patriarch Deng Xiaoping is famously quoted as, “The Middle East has oil, and China has rare earths.”  Japanese companies are the first to become painfully aware of the risks of relying so greatly on China for strategic metals, they have the advantage of history. The Japanese industry base took the oil shocks of the 1970s helped eventually make Japan a leader in fuel-efficiency technologies. Hopefully, the U.S. can see the parallels with what much of the world will be facing with respect to accessing crucial oil supplies in the years ahead.

As global demand for oil in Saudi Arabia grows, there is less oil available for them to export. Saudi Arabian oil demand is expected to grow by 250% over the next two decades according to reports. That means less and less oil for those countries depending on exports from the Middle East. And with China aggressively locking up tens of billions of dollars of oil reserves everywhere on the globe there are going to be few opportunities to find new reserves outside of Saudi Arabia as well.

The electronics recycling project is one example of the Japanese adapting. Maybe someone in the new republican U.S. government will wake up and start a similar project.

Ralph Bach has been in IT long enough to know better and has blogged from his Bach Seat about IT, careers, and anything else that catches his attention since 2005. You can follow him on LinkedIn, Facebook, and Twitter. Email the Bach Seat here.