Japan aims to diversify rare earth supply

Japan is working to diversify its sources of rare earths supply as its imports have climbed in recent years in line with rising output of electric vehicles (EVs), wind turbines and other products that use permanent magnets.

Japan has long recognised the importance of a diversified rare earth supply chain, after China restricted exports of the metals to the country in 2010 during a political dispute. Japan signed a deal with Vietnam to mine the country's large deposits, but more than a decade later Vietnam's domestic production remains limited. China accounts for more than two-thirds of Japan's rare earth imports, according to Japanese customs data.

Japan is the largest consumer of rare earths such as dysprosium outside China, as the world's second-largest producer of permanent magnets, with a market share of less than 9pc. China dominates production of magnets as well as the global supply of rare earth metals and oxides.

The cost of Japan's rare earth imports has soared in 2022, as Chinese metal prices have climbed. The value of rare earth imports into Japan spiked to ¥9.77bn in June, from ¥2.9bn in June 2021, as spot prices climbed earlier in the year. The value of imports fell from the June high to ¥5.9bn in November, customs data released this week show, but remained far higher than the ¥3bn tallied in November 2021.

Japan's import volumes came in at 664.84t in November, down from 841.58t a year earlier and a year-to-date high of 856.97t in April, after imports fell to 543.49 in August. Import volumes have trended higher over the past six years, with a dip during 2020 when Covid-19 restrictions disrupted trade flows. Imports in early 2016 were as low as 378.62t.

The Japanese government included rare earths in its National Security Strategy released this month, stating that: "With regard to supply chain resilience, Japan will curb excessive dependence on specific countries, carry forward next-generation semiconductor development and manufacturing bases, secure stable supply for critical goods including rare earth, and promote capital reinforcement of private enterprises with critical goods and technologies, and strengthen the function of policy-based finance, in pursuit of protecting and nurturing critical goods."

In October, the Japanese government signed a critical minerals agreement with Australia under which Australia will supply Japan with rare earths and other materials for manufacturing low-emissions technologies including batteries, wind turbines and solar panels.

In late November, Japan Organisation for Metals and Energy Security (Jogmec) said it has received interest from multiple Japanese companies in its public tender to take control of its holding in a joint venture with Namibia Critical Metals. The joint venture is developing the Lofdal dysprosium-terbium heavy rare earth project in Namibia. The tender is scheduled to close on 13 March 2023.

Jogmec is an independent Japanese government agency that invests in companies and projects with the aim of securing stable supplies of resources for the country. Jogmec is an investor in Australia-based Lynas Rare Earths, which is the largest rare earth producer outside China and supplies customers in Japan. Jogmec and Japan Australia Rare Earth (JARE) in September invested $9mn in Lynas' expansion project to increase its mining capacity in Western Australia to 12,000 t/yr from 7,000 t/yr by 2024 to meet growing demand.

Japanese companies are also working on shifting the country's domestic demand and supply balance.

Japan's Hitachi Metals, soon to be renamed Proterial as of 4 January 2023, said earlier in December that it has developed ferrite magnet motors for EVs that can reach the same level of output as motors using rare earth magnets containing neodymium, dysprosium and terbium. The company has also been working on optimising neodymium magnets to produce smaller and lighter EV motors with lower dysprosium and terbium content and developing recycling technology to reduce the purchase and use of rare earths. Motors with lower primary rare earth content are "expected to reduce resource risks and costs in addressing the growing demand for xEVs," Hitachi said.

Japan produces around 1mn permanent magnet synchronous motors for vehicles each year, according to trade ministry data.

At the end of November, the Japanese government allocated ¥6bn in its second supplementary budget for the 2022 financial year to establish a method for extracting rare earths from the seabed. The project, run by the Cabinet Office, expects to begin development work in the next financial year. The technology was tested successfully off the coast of Ibaraki prefecture in eastern Japan early this year.

The government aims to conduct exploratory extraction within five years, with plans to establish efficient extraction and production methods that will enable private companies to enter the sector from the 2028 financial year.

By Nicole Willing