Japan and Australia Join Forces to Break China's Rare Earth Monopoly

Japan Invests in Lynas Rare Earths to Reduce Reliance on China

Japan has acquired its first stake in heavy rare-earth elements, a significant step towards reducing its dependence on China, the world's top producer. Japanese trading house Sojitz Corporation and the Japan Organization for Metals and Energy Security (JOGMEC) will invest approximately 200 million Australian dollars ($134.7 million) in Australia's Lynas Rare Earths by the end of March. The investment will be made through Japan Australia Rare Earths, a joint venture established by Sojitz and JOGMEC.

Supplying Japan's Demand

Under the deal, Lynas Rare Earths Ltd will supply Japan with up to 65% of the dysprosium and terbium produced at the Mount Weld mine in Western Australia. This will cover about 30% of domestic Japanese demand for heavy rare earths, according to the Ministry of Economy, Trade, and Industry. Lynas plans to begin mining within the next few years.

Dysprosium and terbium are essential for the production of powerful neodymium magnets that are used in electric vehicle motors and wind turbines. Japan's annual procurement of both rare earths is in the hundreds of tonnes.

Reducing Dependence on China

China currently handles almost all heavy rare-earth production, with the annual global production of rare-earth ore in 2022 reaching about 300,000 tonnes, of which China accounted for about 210,000 tonnes, or 70%. Dysprosium and terbium are concentrated in southern China and Myanmar. Another advantage for China is that it can handle the separation and refining processes within its borders. Rare-earth ores contain radioactive materials that make strict environmental measures essential, increasing costs.

In 2010, China temporarily halted supplies of rare earths to Japan after a dispute between a Chinese fishing boat and a Japanese Coast Guard patrol vessel in disputed waters near Okinawa prefecture. This put Japanese magnet makers in a difficult position. Japan's acquisition of Lynas Rare Earths is a countermeasure against using rare earths as a diplomatic card.

Challenges in Competing with China

While the quality of the ore mined by Lynas is high, competing with China's integrated mass-production system will be a challenge. The Australian supply will only meet about 30% of Japan's domestic demand, meaning that Japan will still need to rely on China for the remaining 70%.

JOGMEC's Efforts to Secure Other Supplies

JOGMEC is rushing to secure other supplies of heavy rare earths in Namibia and other places. Despite the challenges, Japan's investment in Lynas Rare Earths is an essential step towards reducing its reliance on China for the production of rare earths. The investment will help ensure the stability and security of Japan's supply chain of rare earths, which are crucial to the production of key technological components.