Japan focuses its rare earths strategy on non-China sources

Japan’s Rare Earth Strategy: A Deep Dive

Key Concepts:

• Rare Earths: A group of 70 metallic elements crucial for modern technology, despite not being geologically scarce. Their value lies in enhancing performance in applications like magnets.
• Economic Viability of Deposits: Rare earths are rarely found in concentrated, economically viable deposits, making separation and refinement complex and expensive.
• Supply Chain Security: The strategic importance of diversifying rare earth supply chains to reduce reliance on single dominant suppliers, particularly China.
• Deep Sea Retrieval: A novel approach to sourcing rare earths by extracting mineral-rich mud from the seabed.
• Jogmec: Japan Oil, Gas and Metals National Corporation, a government agency responsible for strategic stockpiles and investment in resource projects.
• Recycling: Recovering rare earth elements from end-of-life products like smartphones and electric vehicle components.

I. The Global Rare Earth Landscape & China’s Dominance

Rare earth elements, often referred to as “vitamins of industry,” are essential components in a wide range of modern technologies, including cars, smartphones, and even missiles. Despite the name, these 70 metallic elements are not geologically rare, but are challenging and expensive to extract and refine from economically viable deposits. The current global concern stems from China’s dominant position in the rare earth sector. While China controls approximately 50% of global reserves, it accounts for roughly 70% of mining and 90% of refining – effectively controlling the supply chain.

This dominance was demonstrated in 2023 when China briefly imposed export controls during a trade dispute with the US, forcing some auto manufacturers to halt production due to a lack of rare earth-based magnets. This prompted the US, under President Trump, to forge agreements with Asian countries, including Japan, to collaborate on securing critical minerals. More recently, Vice President JD Vance proposed a critical minerals trading bloc with allies to counter China’s practice of flooding the market with cheap materials to undermine competitors.

II. Historical Shift in Production & China’s Strategic Advantage

Historically, Western countries were significant players in rare earth production. However, by the 1980s and 90s, rising costs, stricter environmental regulations, and falling prices led to a decline in domestic production. China, recognizing the strategic importance of rare earths, adopted a long-term policy to secure its position. In 1987, Deng Xiaoping famously stated, “The Middle East has oil; China has rare earth.”

The Chinese government invested heavily in exploration, mining, and, crucially, refining and separation processes. Refining and separation are the key choke points in the supply chain, requiring complex technology, significant capital investment, and often generating pollution. China’s comparatively lax environmental standards at the time allowed it to gain a significant cost advantage, solidifying its dominance.

III. Japan’s Response: De-Risking the Supply Chain

Japan, heavily reliant on China for rare earths, began actively working to diversify its supply chain over a decade ago, spurred by a 2010 incident where China imposed an unofficial export ban during a dispute over the Senkaku/Diaoyu Islands. This event, which included protests and damage to Japanese vehicles in China, served as a wake-up call.

Japan’s initial response involved a significant investment in Australian company Lynas in 2011, the largest rare earth producer outside of China. This investment reduced Japan’s dependence on China from nearly 90% in 2010 to around 60% currently, with increased sourcing from Vietnam and Thailand. However, 60% dependence remains a concern, as a continued disruption from China could cost Japan an estimated $4.2 billion over three months.

IV. Innovative Approaches: Deep Sea Retrieval & Recycling

Recognizing the ongoing risk, Japan is pursuing innovative strategies to further secure its rare earth supply. A key initiative is deep sea retrieval, extracting mineral-rich mud from the seabed approximately 6,000 meters below the surface near Minami-Toishima Island in the Pacific Ocean. This mud contains high concentrations of dysprosium and neodymium, crucial for high-performance magnets used in electric vehicle motors.

Initial sampling efforts have been successful, with samples retrieved in February. However, the economic viability of this approach remains uncertain. The project is designed to test the feasibility of the extraction system, with a larger-scale test planned for the following year, aiming to extract 350 metric tons of mud per day. While deep sea retrieval offers the potential to reduce reliance on China, it is expected to be more expensive than current Chinese sources. Furthermore, Japan lacks domestic refining capacity and would need to invest heavily in building it or utilize facilities in allied countries like Malaysia (where Lynas operates a refinery), adding to transportation costs.

Beyond deep sea retrieval, Japan is also focusing on recycling rare earths from end-of-life products, such as smartphones, refrigerators, and electric vehicles. This approach offers a potentially significant source of materials. Additionally, Japanese companies like Amoemo are developing driving motor systems for electric vehicles that eliminate the need for rare earths altogether, though achieving comparable performance remains a challenge.

V. Government Support & Long-Term Vision

The Japanese government, through Jogmec, plays a crucial role in securing the rare earth supply chain. Jogmec maintains strategic stockpiles (estimated at 6-12 months’ worth of rare earths) and invests in international projects, such as a co-investment in the French company Caramag, which is developing a rare earth refining and recycling project.

Kim Onoda, Japan’s Minister in charge of economic security, has acknowledged the potential costs associated with these initiatives but emphasized the necessity of prioritizing national security over cost considerations. She stated that protecting the nation is paramount, even if it means accepting higher rare earth prices.

Conclusion:

Japan’s rare earth strategy is a multifaceted approach aimed at reducing its dependence on China and securing a stable supply of these critical materials. The strategy encompasses diversification of sourcing, investment in innovative technologies like deep sea retrieval, promotion of recycling, and government support for research and development. While these efforts are likely to result in higher costs, Japan views them as a necessary investment to safeguard its economic security and maintain its technological competitiveness in the long term. The success of the deep sea retrieval project and the development of rare earth-free alternatives will be key indicators of Japan’s progress in achieving its strategic goals.