Countries around the world are grappling with the challenge of reducing China’s dominance in critical mineral supply chains. To navigate this complex issue, there are valuable lessons to be learned from Japan’s historical experiences and strategies. Japan faced significant challenges with overreliance on Chinese mineral supply chains more than a decade ago, and its response offers insights for current and future efforts.
Historical context and immediate response
Japan’s encounter with supply chain vulnerabilities began in 2010 when a territorial dispute with China led to an export ban on rare earth elements (REEs), crucial for various high-tech applications. Although the ban was short-lived, it prompted Japan to reassess and overhaul its approach to securing critical minerals.
Key strategies and lessons
- Investing in alternative producers and processors
Japan’s proactive measures included investing in alternative producers and processors. Japanese companies played a pivotal role in supporting the emergence of Lynas, an Australian REE producer, and fostering Malaysia’s growth as a significant processing hub. They also supported U.S. efforts to boost domestic REE production at facilities like Mount Pass. This diversified approach helped reduce China’s share in global REE mining from 95% to 60%. However, China still dominates REE processing, illustrating the limitations of this strategy and highlighting the need for a comprehensive supply chain resilience approach.
- Stockpiling as a response to price spikes
Japan began stockpiling REEs immediately after the 2010 export ban, but this strategy had mixed results. The rush to stockpile exacerbated a price bubble that lasted over a year. Despite this, stockpiling remains an effective method to manage resource scarcity and price volatility. Countries like the U.S., South Korea, and the UK have adopted similar stockpiling practices. Collaborative stockpiling efforts, potentially through alliances like the Mineral Security Partnership (MSP), could further enhance effectiveness and mitigate risks to transition mineral supply chains.
- Promoting technological alternatives
Japan has pursued the development of technologies that use fewer REEs or alternative materials. For instance, Japanese automakers have explored hydrogen technology as an alternative to electric vehicles (EVs). However, this approach has left a gap in the market that Chinese automakers have capitalized on. Collaborating with other countries on technology development, such as new battery materials or solid-state batteries, could accelerate the transition away from critical mineral reliance. Including China in these collaborative efforts could expedite progress.
- Advancing recycling technologies
Japan has made strides in developing recycling technologies for REEs and other materials. However, commercial-scale recycling remains limited, particularly for REEs, which may not become viable until the 2030s. China currently leads in recycling technology development, making it crucial to engage with China even as efforts to reduce reliance continue. Expanding recycling capabilities will require learning from Chinese advancements and fostering international cooperation.
Moving forward
The concentration of transition mineral supply chains in China poses significant risks for global economies and their green energy transitions. While China’s control can be leveraged, it is unlikely to be used aggressively without provocation. Balancing efforts to reduce reliance on China with ongoing engagement is essential.
Japan’s experience provides valuable guidance on managing these challenges. Effective strategies include diversifying sources, stockpiling critical materials, investing in technological innovations, and advancing recycling practices. Collaborative approaches and international partnerships will be crucial in mitigating supply chain risks and ensuring a resilient transition to a sustainable green economy.
By integrating these lessons, countries can better navigate the complexities of mineral supply chains and enhance their own strategic positions in the global market.
