Japan Invests Millions in Australian Deal for Rare Earth Metals, To Cut Chinese Reliance

John Lopez, Tech Times 08 March 2023, 05:03 pm

Japan has announced a AUD$ 200 million ($134.7 million) investment in Lynas Rare Earths, an Australian mining company developing heavy rare-earth elements, Nikkei Asia reports.

The same report tells us that the investment comes as Japan looks to reduce its reliance on China, the world's top producer of rare earth metals.

Japan's First Major Investment in Rare Earth

Japan Australia Rare Earths, a joint venture between Japanese trading firm Sojitz and the Japan Organization for Metals and Energy Security (JOGMEC), will invest in Lynas Rare Earths.

This will be Japan's first investment in heavy rare earth elements needed to make magnets for electric vehicle motors as well as wind turbines.

According to Mining.com, Lynas will supply up to 65% of the dysprosium and terbium produced at the Mount Weld mine in Western Australia to Japan. This will fulfill a large portion of Japan's domestic demand for heavy rare earths.

Dysprosium and terbium are used to improve the heat resistance of neodymium magnets, which are used in electric vehicle motors and wind turbines.

According to publicly available data, the global rare earth metals market generated more than $5 billion in revenue in 2021 and is projected to surpass $10 billion by 2030.

The market is becoming even more profitable as countries increase their efforts to reduce emissions and adopt new technologies such as EVs and clean energy.

Lessening Reliance on China

China currently produces nearly all heavy rare-earth metals, accounting for approximately 70% of the world's annual rare-earth ore production. China generated almost 210,000 metric tons of rare earths from its mines in 2022 alone, according to Statista data.

This has made China the world's biggest supplier of rare earths. It has built a global monopoly through an integrated system that manages the entire process from mining to refining.

However, why is Japan shifting its investment to Australian rare earths? Nikkei Asia cites that China temporarily stopped exporting rare earths to Japan in 2010 following a collision between a Chinese fishing boat and a Japanese patrol boat in disputed waters close to the prefecture of Okinawa.

This created a dilemma for Japanese battery and magnet manufacturers and highlighted the significance of securing a rare earth supply outside China. Concerns have been raised about China's ability to use rare earth metals as a diplomatic tool.

Reports also highlight that cost is another issue that Japan will face as it reduces its reliance on China. While the ore mined by Lynas is of high quality, competing with China's integrated mass-production system will be challenging.

According to Reuters, the agreement with Japan Australia Rare Earths BV, the special purpose company formed by the state-owned Japan Organization for Metals and Energy Security and Sojitz Corp, will also waive a historic $11.5 million interest payment due under a prior loan.

Nonetheless, Japan's investment in Lynas Rare Earths is a significant step toward securing a supply of rare earth outside China.

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