Japan takes first stake in heavy rare earths to reduce China reliance

TOKYO -- Japan has acquired its first interest in heavy rare-earth elements, which are essential for magnets used in electric vehicle motors, in a step toward weaning off a reliance on China, the world's top producer.

Japanese trading house Sojitz 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 through Japan Australia Rare Earths, a joint venture set up by the two Japanese entities, Sojitz said in a statement Tuesday.

Under the deal, Lynas 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 the heavy rare earths, according to the Ministry of Economy, Trade and Industry. Lynas plans to start mining within the next few years.

Dysprosium and terbium are used to enhance heat resistance of powerful neodymium magnets, which are essential for reducing the size of EV motors and wind turbines. Japan's combined annual procurement of both rare earths is in the hundreds of tonnes.

Lynas plans to transport rare-earth ore mined from Mount Weld outside the country, where the rare earths are separated from the ore and refine them. Until now, the separation and refining processes have been outsourced to Chinese companies, but Lynas aims to supply Japan through a new supply chain that bypasses China.

China currently handles almost all heavy rare-earth production. The annual global production of rare-earth ore in 2022 reached about 300,000 tonnes, of which China accounted for about 210,000 tonnes, or 70%. In particular, dysprosium and terbium are concentrated across southern China and Myanmar.

Another of China's advantages 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.

The U.S. and other countries used to produce rare earths, but China has built a global monopoly through an integrated system that handles the entire process from mining to refining.

In 2010, following a collision between a Chinese fishing boat and a Japan Coast Guard patrol vessel in disputed waters near Okinawa prefecture, China temporarily halted supplies of rare earths to Japan, putting Japanese magnet makers in a bind. If Japan can secure a supply outside of China, it will be a countermeasure against using rare earths as a diplomatic card.

Cost remains an issue. A Sojitz representative said the quality of the ore mined by Lynas is high, and that Japan's operations will be cost-competitive with Chinese companies. However, it will not be easy to compete with the country's integrated mass-production system.

The Australian supply will only be enough for about 30% of domestic demand, meaning Japan will continue to rely on China for the remaining 70%.

JOGMEC is rushing to secure other supplies of heavy rare earths in Namibia and other places.

Source: Nikkei Asia