Sail across the sea

Chapter 472 If we let the wind out
Hearing the president speak, everyone shifted their attention from political discussions back to reality. Kazumasa Katayama spoke up:
"Perhaps we could join forces with Sande Alloy and Nobunaga Chemical to boycott China's high-priced rare earths. We could issue a statement saying that if the Chinese authorities do not abolish the inappropriate special resource tax, we will stop importing rare earths from China."

"You have to understand that China is a country with a severe shortage of hard currency. They often resort to drastic price reductions to attract foreign merchants to import their goods in exchange for hard currency. Rare earth exports bring China as much as 200 billion yen in hard currency every year, and I think the Chinese government will not give up this part of hard currency revenue."

Hisao Nishida retorted, "However, if they insist on levying a resource tax, they could obtain 600 billion yen in hard currency, because we simply cannot stop importing rare earths from China."

“The Chinese don’t know this,” Kazumasa Katayama argued.

Hisao Nishida said, "They have the most rare earth experts in the world, how could they not know the distribution of rare earths around the world? Currently, heavy rare earths can only be produced in southern China, a fact known to rare earth experts worldwide, and even more so to the Chinese."

Katayama Kazumichi: "But they don't understand our needs. If we spread the word that we've found a technology to replace heavy rare earth elements, they'll definitely be worried. It's like when Western countries threatened to replace oil with coal during the oil crisis, which is why OPEC didn't dare to use oil as a weapon too much."

"To deceive the Chinese, it's not enough to just let some rumors out. Mr. Katayama, can you find any evidence to prove that an alternative technology exists?" Sato Hiroshi interjected.

Katayama Kazumichi: "Hi! President, I have indeed been paying attention to some new technologies aimed at replacing heavy rare earth elements. For example, the Tokyo Institute of Technology recently released a new achievement that uses magnesium oxide and cerium dioxide to replace yttrium oxide as trace amounts in special ceramics, and the effect is almost the same as that of yttrium oxide."

Cerium is also a rare earth element, but it belongs to the light rare earth category, and its proven reserves worldwide are very large. Yttrium, on the other hand, is a heavy rare earth element, currently mainly sourced from heavy rare earth producing areas in southern China. If cerium dioxide could indeed replace yttrium oxide in certain applications, it would undoubtedly be a blow to the demand for heavy rare earth elements.

“I am aware of this research, but it is said that special ceramics using cerium dioxide as a trace amount do not perform as well as products using yttrium oxide under high-temperature conditions. Special ceramic materials are often used in high-temperature environments, such as ceramic turning tools using zirconium oxide as the main material, which can operate at temperatures above 800 degrees Celsius,” Hisao Nishida said.

In those days, most senior executives in Japanese companies came from technical backgrounds and were quite knowledgeable about technical issues. A few years later, the main sources of senior executives were marketing or finance experts—the kind of "liberal arts graduates" that people looked down upon; they couldn't understand what ceramic micro-materials were all about.

Sato Hiroshi thought for a moment, then turned to Ono Kenji and asked, "Ono-kun, could your sales department try to convey this information to the Chinese authorities, warning them that if they do not abandon the practice of levying high resource taxes, Japanese companies will fully launch a strategy to replace heavy rare earth elements?"

“I will do my best to do it. In the process, I will need the great assistance of Mr. Katayama and Mr. Nishida,” Kenji Ono replied, bowing to Kazumasa Katayama and Hisao Nishida, who naturally returned the bows in return.

"On the other hand, we also need to mobilize Chinese economists to lobby the government to explain the necessity of free trade policies. The Chinese government is currently increasing its openness, and liberal scholars have a very strong voice within the government," said Hiroshi Sato.

Kenji Ono said, "Your Excellency, could we temporarily reduce some of our rare earth ore imports to make the local governments in China's rare earth producing areas feel threatened? This would also make it easier for them to cooperate with our statement on alternative rare earths."

Sato Hiroshi looked at Nishida Hisao and asked, "Nishida-kun, how much rare earth stock do we have left?" Nishida Hisao replied, "In terms of heavy rare earth stock alone, we have more than 400 tons."

"This is only enough for our consumption for 6 months," Kazumasa Katayama warned.

“We are not completely stopping rare earth imports, just reducing them,” said Hiroshi Sato. “Let’s cut imports by 50% for now, so we can maintain production for at least a year. I think the Chinese government doesn’t have the patience to drag this out with us.”

"Should we also notify Sande Alloy, Nobunaga Chemical, and other companies about this?" Kenji Ono asked.

“Of course,” Sato Hiroshi said. “I will have someone arrange a meeting with the chairmen of several companies in the coming days to discuss a strategy for joint action. It is not enough for just one of us to put pressure on the Chinese government. Only by pooling the strength of all Japanese rare earth companies can we make them feel the pressure.”

In the days following the meeting, the presidents of Japan's largest rare earth smelting companies held a closed-door consultation and then issued a joint statement to the media, claiming that the Chinese government, relying on its monopoly position in heavy rare earth minerals, had disregarded internationally accepted trade rules and brazenly raised rare earth export prices, seriously damaging the international trade order and the feelings of the vast number of rare earth users.

The announcement stated that, in response to the actions of the Chinese government, Japanese rare earth manufacturers have decided to invest 1000 billion yen in the research and development of rare earth alternative technologies, and are launching a technology tender to research institutions worldwide, effective immediately. At the same time, rare earth manufacturers will temporarily reduce rare earth imports by 50% and simultaneously cut the production of rare earth oxides, prompting rare earth users to seek more alternatives.

Japanese media followed suit, publishing lengthy reports and editorials with headlines such as "Companies Join Forces to Declare War on Rare Earth Monopoly," "Resources Cannot Be a Noose Around Japan's Neck," and "Japan Can Say No," sparking widespread discussion.

Faced with questions from the media and the public, officials from Japan's Ministry of International Trade and Industry had no choice but to step forward and say that they would negotiate with the Chinese government on this matter, emphasizing that Japan's industrial development must not be coerced by resource-exporting countries.

A commotion suddenly broke out on the other side of the river, and this news quickly spread throughout China. Countless "relevant departments" took notice of the incident and urgently assessed its impact on their work.

The Ministry of Foreign Trade was undoubtedly the hardest hit by the storm. Officials within the Ministry, bewildered, made numerous inquiries to understand the full story. Ultimately, several clues pointed to the same person:

Gao Fan, Chairman of Maolin Canghai Chemical Group Co., Ltd.

(End of this chapter)