Tuesday, May 25, 2021

"Japan’s global rare earths quest holds lessons for the US and Europe"

In 2010, the Japanese government had a rude wakeup call: Beijing had abruptly cut off all rare earth exports to Japan over a fishing trawler dispute. Tokyo was almost entirely dependent on China for the critical metals, and the embargo exposed this acute vulnerability.

The silver lining to this incident, which sent global rare earth prices skyrocketing before they crashed down as the speculative bubble popped, is that it forced Japan to rethink its critical raw materials policy. A decade on, it has significantly reduced its dependance on China for rare earths, and continues to diversify its supply chain by investing in projects around the world. Its model may have lessons for the US, which desperately wants to break China’s rare earths monopoly. Rare earths are a group of 17 metals that are crucial in the manufacturing of high-tech products.

“Japan experienced what the US faces now: a political conflict with China, in which China seems to be willing to exploit its dominance in the [rare earths] market,” wrote Marc Schmid, who researches rare earths at the Martin Luther University Halle-Wittenberg. “The US appears to be in a similar vulnerable position as Japan was about a decade ago.”

A state-led, global quest

Central to Japan’s rare earths procurement strategy is the Japan Oil, Gas and Metals National Corporation, or Jogmec, a state-backed company governed by the ministry of economy, trade, and industry. Though Jogmec was established in 2004 through the merger of two decades-old oil and metals mining entities, it was only after China’s embargo that it turned its attention to rare earths, said Nabeel Mancheri, secretary-general of the Brussels-based Rare Earth Industry Association: “The focus started from the 2010 crisis.”

A key prong of Jogmec’s strategy was to diversify Japan’s supplies. That meant investing in and partnering with rare earths companies around the world starting soon after the Chinese embargo, including rescuing Australia’s Lynas from collapse, in order to build a wider portfolio of suppliers. It also supports efforts to recycle rare earths, as well as research to develop rare earth substitutes. That strategy has been largely successful: Japan slashed rare earth supplies from China from over 90% of imports to 58% within a decade, according to UN Comtrade data. It aims to bring that below 50% by 2025.

As the global shift to electric vehicles and renewable energy is expected to drive a surge in rare earth demand, Japan is set to further increase funding for the exploration and mining of rare earths, according to Nikkei. One consideration is to lift the current 50% cap on state funding for resource exploration projects, which could ease the private sector’s financial burden in inherently risky mining projects.

Industry experts say Japan’s example illustrates the importance of targeted state-led investment in the rare earths sector. Through Jogmec, Japan could direct substantial government funds to support different mining projects, and secure rights to a certain amount of rare earths in what’s known as offtake agreements. Often, that means Japan is able to lock in a specified quantity of rare earth imports over a designated time frame. That also stabilizes the volume and price of supplies, which is important for the sustainability of downstream manufacturers that use rare earth materials to produce batteries and magnets that go into things like electric vehicles and wind turbines.

For instance, Jogmec and top Japanese trading firm Sojitz invested $250 million in Lynas in 2011 in return for a steady supply of rare earths. The loan terms were restructured in 2016 to keep the ailing Lynas from going bust, and restructured again in 2019 to ensure Japan gets “priority supply” of its rare earths through 2038....


 Some of our posts at the time:

October 2010:
June 2012  
Japan has taken the rare earth sector very seriously since prices spiked ten-fold a couple years ago, some of our links are below the jump.
From the WSJ's Japan Real Time blog:

Clear As Mud: The Answer to Japan’s Rare Earth Concerns
Amid mud on the seabed 2,000 kilometers from Tokyo, Japan may have found the answer to its rare-earth supply concerns for centuries to come.

For the first time, Japanese explorers have discovered large deposits of rare-earth minerals on the ocean floor within the country’s exclusive economic zone.

The researchers estimate about 6.8 million metric tons of rare earth minerals, including dysprosium, exist in the mud across a 1,000-square-meter seabed near Japan’s easternmost island, Minami-torishima, about 2,000 kilometers southeast of Tokyo.

The volume is impressive: The recoverable minerals could be enough to supply Japan’s rare earth metal consumption for at least 200 years, team leader Yasuhiro Kato, an earth sciences professor at Tokyo University, said on Friday.

The underwater discovery of the minerals – a centerpiece in rising global trade tensions with China – could be a valuable boon for Japan. In March, Asia’s second-largest economy joined an international trade action lodged by the U.S. and European Union against China, which produces more than 95% of the world’s rare earth supplies over curbed exports of the minerals....MORE
Oct. 2010 
"Japan Scrambles for Rare Earth" (AVL.TO; LYC.AX; MCP) 600111: Shanghai
Oct. 2010 
"Japan's rare earth minerals may run out by March" and Japan to Mine Sewage Sludge, E-Waste for Precious and REE Metals
July 2011 
Rare Earths: Japan Finds Huge Undersea Deposits; German Industry Dubious; Stocks Droop (AVL; MCP; REE)
Stocks trade generally mournful and reflective.
In early premartket, Molycorp is down, $1.54 (2.57%) at $58.30, Rare Element is down 2.65% at $10.64 and Avalon is down 2.92%
Auspicious update, below.
Sept. 2011 
Predictions: Rare Earth Demand 2015-2020 (MCP; REE; AVL)