Nikkei Drops; Sojitz and Lynas in Rare Earth Deal

Chandrasekhar Atreya
24 Nov, 2010
New York City

Tokyo stocks held steady despite mounting tensions in the Korean peninsula. Australia based Lynas Corp signs a 10-year deal to supply rare earths through Sojitz Corp. Japan promises support to South Korea and threatens North Korea with sanctions. October department stores sales rise after 32 months.

[R]5:00 PM Tokyo, Japan – Tokyo stocks held steady despite mounting tensions in the Korean peninsula. Australia based Lynas Corp signs a 10-year deal to supply rare earths through Sojitz Corp. Japan promises support to South Korea and threatens North Korea with sanctions. October department stores sales rise after 32 months.[/R]

Tokyo stocks were able to hold steady despite the rising tensions in the Korean peninsula and lost moderately in trade on Wednesday. The yen closed nearly flat. Shares in banks, automakers and exporters dropped on global concerns.

The Nikkei 225 Stock Average closed at 10,030.11, 0.84% or 85.08 points down from the close on Monday since Tuesday was a national holiday. The broader Topix fell 1% to 866.57 with all its 33 groups declining.

Japan on Wednesday threatened North Korea with tougher economic sanctions in response to the shelling of a South Korean island amid growing concerns about the impact of the tensions between the two Koreas.

“We may move to strengthen sanctions against North Korea,” said Economy Minister Banri Kaieda at a news conference, noting that this conflict could weigh heavily on Japanese shares.

The Tokyo Stock Exchange said today that it will shorten the trading suspension period to half the present level to stimulate trading. At present the exchange halts stock for 30 minutes when a company announces a plan for a merger or an acquisition.

The bourse will also bring into service The Nikkei China Related Stock 50, which comprises of 50 China-related stocks selected from among major Japanese companies with effect from December 13.

Sumitomo Construction Co will invest 400 million yen to build a spare part center for its hydraulic excavators it makes at its factory in Tangshan, Hebei Province by the beginning of 2012.

The warehousing facility will be built adjacent to its factory to keep stockpile of some 2,000 different items. The company already has a similar part center in Singapore and Dubai.

The Chairman of the Japanese Bankers Association said that despite strong first half results at banks, second half results will likely be weaker due to a drop in lending volumes.

“Lending and other core businesses saw smaller profit margins in the first half,” said Masayuki Oku who doubles as President of Sumitomo Banking Corp at a news conference in Tokyo.

Sales at department stores rose in October by 0.6% from a year ago, for the first such rise in 32 months, to 512.1 billion yen, the Japan Department Stores Association said today.

Sales at department stores in Tokyo grew 2.7% to 128.9 billion yen, also the first such expansion in 32 months.

The support for the current cabinet of Prime Minister Naoto Kan was 23.6% on Wednesday, down 9.1% from the previous poll conducted earlier this month by Kyodo News.

Australia promised to provide a reliable long-term supply of the increasingly scarce rare earth minerals Japan needs for its economy. Foreign Minister Kevin Rudd said that Australia stands ready to be a long-term secure, reliable supplier of rare earths to the Japanese economy in the future.

Sydney-based Lynas Corp said it is in advanced stages of discussion to secure additional supply of rare earths for the Japanese market by accelerating expansion of the Lynas rare earth project at Mt Weld which is due to start production in 2011.

Lynas Corp and Sojitz Corp of Japan signed an agreement, which if successful will see the two companies allocate 8,000 tons to 9,000 tons of rare earths to the Japanese market over the next 10 years to be jointly marketed by the two and distributed by Sojitz.

Foreign Minister Seiji Maehara and Australian Trade Minister Craig Emerson agreed Tuesday, to resume their bilateral talks on free trade agreement sometime early next year during their talks in Canberra, according to a Japanese official.

Stock Movers

Sojitz Corp, a trading firm of Japan, gained 9.09% to 168 yen after signing a deal with Lynas Corp of Australia for rare earth supplies for 10 years.

Mitsubishi Corp, a commodity trader, lost 1.4% to 2,115 yen and Inpex Corp, Japan’s largest oil explorer, lost 2.12% to 438,000 yen. Japan Petroleum Corp retreated 1.3% to 3,060 yen.

Banks closed lower. Mitsubishi UFJ sank 1.94% to 405 yen and Sumitomo Mitsui Financial Group Inc, the second largest bank of Japan by market value lost 2.45% to 2,590 yen.

Toyota Motor lost 0.91% to 3,270 yen and Honda Motor Co fell 1.76% to 3,065 yen. Nissan Motor retreated 2.11% to 787 yen.