- Japan trading house eyes Southeast Asia, U.S. for crucial resources
According to Nikkei Asia article published on February 21, 2023, Japanese trading house Sumitomo Corp. plans to supply rare earth elements for electric vehicles without involving China, the world's biggest supplier of rare metals that are key to the production of clean-energy systems, such as electric vehicles and wind turbines, Nikkei has learned.
Sumitomo will substitute U.S. and Southeast Asian companies for rare earth element production, which involves a long and complex process from mining to smelting.
At present, some 90% of rare earth ores are smelted in China. But growing concerns about a possible geopolitical crisis involving China have led many companies to look for ways to supply rare earths while bypassing China.
Sumitomo currently relies on Chinese smelters to extract rare earth elements, such as neodymium and praseodymium, from ores mined by MP Materials, a company based in the U.S. city of Las Vegas.
Under the new arrangement, MP Materials will handle not only mining but also smelting of ores and separating various elements from them. Those elements will be further refined by companies in Vietnam and the Philippines, before being shipped to Japanese magnet makers for use in final products.
The new supply chain arrangement is set to start operating in July.
Sumitomo expects to supply 3,000 tons of neodymium and praseodymium a year to Japanese magnet makers, or about 30% of their annual consumption.
As part of the new supply arrangement, Sumitomo will sign an agreement with MP Materials to become the U.S. company's sole distributor in Japan. This will keep the cost of supplying rare earths at about the same level, after U.S. government subsidies paid to MP Materials are taken into account.
As of 2022, China accounted for about 90% of smelting and about 70% of rare earth production, according to data from research institutes including the U.S. Geological Survey. The heavy reliance on China has prompted concerns, and U.S. President Joe Biden is working on developing a rare earth supply chain within the U.S.
Japanese companies are also working to reduce their dependence on their giant neighbor for supplies of key clean-energy materials. Japanese robot maker Yaskawa Electric is building a new factory in Fukuoka, in southwestern Japan, to bring back from China production of inverters, a key component in appliances. The new plant is scheduled to come online in 2027.
Japanese air conditioner maker Daikin Industries is also working to ensure that it can maintain production without components from China. The Osaka-based company expects to complete the revamp of its supply chain by March 2024.
