Japan’s Global Quest for Rare Earths Contains Lessons for the US and Europe
In 2010, the Japanese government had a rude wake-up call: Beijing suddenly had cut all rare earth exports in Japan for a dispute over a fishing trawler. Tokyo was almost entirely dependent on China for critical metals, and the embargo exposed this acute vulnerability.
The upside of the incident, which spiked global rare earth prices before collapsing as the speculative bubble burst, is that it forced Japan to rethink its critical commodity policy. A decade later, it has dramatically reduced its reliance on China for rare earths and continues to diversify its supply chain by investing in projects around the world. His model may have lessons for the United States, which desperately wants break the Chinese monopoly on rare earths. Rare earths are a group of 17 metals essential for the manufacture of high-tech products.
“Japan has gone through what the United States is facing now: a political conflict with China, in which China appears to be willing to exploit its dominance in the [rare earths] market,” wrote Marc Schmid, who studies rare earths at Martin Luther University in Halle-Wittenberg. “The United States appears to be in a similar vulnerable position to Japan about ten years ago.”
A state-led global quest
At the heart of Japan’s rare earth sourcing strategy is the Japan National Oil, Gas and Metals Corporation, or Jogmec, a state-backed company regulated by the Ministry of Economy, Trade and Industry. Although Jogmec was established in 2004 by the merger of two-decade-old petroleum and metals mining entities, it was only after the Chinese embargo that it turned to rare earths, said Nabeel Mancheri, secretary general of the rare earth industry based in Brussels. Association: “The focus started from the 2010 crisis.”
A key part of Jogmec’s strategy was to diversify supplies from Japan. It meant investing and partnering with rare earth companies around the world. starting shortly after the Chinese embargo, including save the lynas of Australia collapse, in order to build a larger portfolio of suppliers. It also supports efforts to recycle rare earths, as well as research to develop substitutes for rare earths. This strategy has been largely successful: Japan has reduced rare earth supplies from China from more than 90% of imports to 58% in a decade, according to data from UN Comtrade. He aims to bring that below 50% by 2025.
As the global shift to electric vehicles and renewables is expected to lead to increased demand for rare earths, Japan is poised to further increase funding for rare earth exploration and mining, according to Nikkei. One consideration is to lift the current 50% cap on state funding for resource exploration projects, which could ease the financial burden on the private sector in inherently risky mining projects.
Industry experts say the example of Japan illustrates the importance of targeted state-led investment in the rare earth sector. Through Jogmec, Japan could allocate significant government funds to support different mining projects and obtain rights to a certain amount of rare earths under so-called take-off agreements. Often, this means that Japan is able to lock in a specified amount of rare earth imports over a specified period. It also stabilizes the volume and price of supplies, which is important for the sustainability of downstream manufacturers who use rare earths to produce batteries and magnets that go into things like electric vehicles and wind turbines.
For example, Jogmec and the main Japanese trading company Sojitz invested $ 250 million to Lynas in 2011 in exchange for a steady supply of rare earths. The terms of the loan were restructured in 2016 to keep sick Lynas from going bankrupt, and restructured again in 2019 to guarantee Japan a “priority supply” of its rare earths until 2038.
Elsewhere, Jogmec recently deepened its investment in a joint venture with Namibia Critical Metals, headquartered in Canada, on the Lofdal rare earth mining project in Namibia. Jogmec has already invested millions to finance the exploration and development of Lofdal, and could flow (pdf) an additional $ 10 million. The Lofdal project is of particular importance because it is rich in heavy rare earths.
The “light” and “heavy” rare earths designate their atomic number. Lynas is focusing more on the former, while China currently dominates the global supply of the latter. The most widely used rare earth permanent magnet, neodymium-iron-boron or NdFeB, uses the light rare earths neodymium and paseodymium. The addition of a heavy rare earth such as dysprosium and sometimes terbium makes the magnet more temperature stable and suitable for use in offshore wind turbines where maintenance costs are high.
One of the reasons the United States and Europe have not been so active in providing meaningful state support to the rare earth industry is that these governments are simply not prepared for the task, said Kotaro Shimizu, chief analyst at Mitsubishi UFJ Research and Consulting. While the US Geological Survey works on rare earth issues, it is essentially a research organization and does not have a funding function, he said. Likewise, the European Commission has a innovation board, but it is also focused on research rather than funding.
So far, the most recent US federal funding for rare earth projects has come of the Department of Defense. Meanwhile, a body inspired by Jogmec was actually proposed by the European Commission in 2015, although the idea did not materialize.
Lessons from Japan for the United States and Europe
As the United States and Europe seek to secure their rare earth supply chains and limit their dependence on China, the Japanese model may offer some pointers.
A key difference is that while Japan is scarce in mineral resources, the United States and Europe have significant rare earth reserves. The problem, in the case of the United States, is that they have ceded their mining and processing capabilities to China in recent decades, and now must rebuild the industry at a time when China is already deeply rooted in global rare earth supply chains.
“Japan and Australia have definitely led the way in how the US government should approach [securing rare earths supplies]But this is “not necessarily a cut and paste job” for Washington in terms of specific policy emulation, said Pini Althaus, CEO of USA Rare Earth, which is developing a mine in Texas and establishing a plant. home treatment in Colorado. It is expecting to become public in a New York list this year.
For example, the United States could use existing federal legislation to build up its stockpile of rare earths for national defense by committing to purchase rare earths from domestic producers for a certain number of years, and within a certain range of award, explained Dan McGroarty, member of the advisory board. of USA Rare Earth.
It would, in fact, be a resale agreement just like Jogmec’s with various rare earth producers. And the U.S. government, by committing to buy from a particular domestic producer, would send a strong signal to financial markets, McGroarty said. It would also avoid “picking winners and losers,” which would involve direct federal subsidies to specific companies, perhaps to the detriment of keeping private capital away from other companies.
Experts also warn that rare earth mines are only the upstream part of the supply chain concerned with extracting minerals from the ground. Equally crucial is the transformation of these ores into high purity rare earth metals, and then their use to make magnets and batteries.
“Around 100 new mines can open around the world with generous government support, but without investing in value-added processing and manufacturing, the rest of the world will continue to remain dependent on China for refined rare earths and technologies containing rare earths ”. said Julie Klinger, assistant professor of geography at the University of Delaware.
Aside from the bulk of rare earth sourcing policies, there is one key takeaway from Japan’s relative success, Mancheri of the Rare Earth Industry Association said: “It’s just now , to have your own value chain, government support is needed. The market cannot bring back the industry you lost. “
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