Japan relies heavily on imports in the field of key minerals. After China tightened its export controls, Japan has been suffering greatly and continues to struggle.
According to a Japanese media report by Nikkei Asia on June 10, sources familiar with the matter revealed that Nippon Shinyo Chemical Industry plans to build a new rare earth smelting plant in Japan. The company hopes to achieve mass production of rare earth products and reduce its dependence on China.
Regarding this, industry insiders in Japan have long pointed out that the Japanese metallurgical industry finds it difficult to compete with China.
However, according to reports, given China's advantages in terms of costs and other factors, Japanese companies may focus on establishing a supply chain to create demand for rare earth products produced domestically, even if the prices are higher.
Although Japanese companies such as Shin-Etsu Chemical, Mitsui Metal Industries, and Sumitomo Metal Mining produce rare earth products, Japan's share of global production is less than 1%. Domestic demand is almost entirely met through mining and smelting in China.
Sources familiar with the matter said that Shin-Etsu Chemical will establish a system to purchase rare earths from countries outside China and produce them on a large scale. This will help establish an in-country supply chain for downstream users such as Japanese electric vehicle manufacturers.
According to reports, Shin-Etsu Chemical plans to invest at least 350 billion yen (about 1.48 billion RMB) in building a new smelter in Futaba Prefecture, central Japan. The cost will include 175 billion yen in government subsidies. The company already has two smelters in Futaba Prefecture. This new smelter will be the company’s first such facility since 2008.
To produce rare earth products, it is necessary to refine ores containing 17 rare earth metals in specialized facilities.
According to reports, Shin-Etsu Chemical is capable of extracting 16 elements. The company will build a new refining plant to increase its ability to supply elements such as dysprosium and thulium. Dysprosium and thulium are used in neodymium magnets in electric vehicle motors, while yttrium is used in semiconductor manufacturing equipment.
Shin-Etsu Chemical Plant - Japanese Media Photo
Beyond Xinyue Chemical, companies such as Sumitomo Metal and Jumo Metals from Japan are expanding their production capacity for rare earth products.
Mitsui Metal will invest 10 billion yen in building a new production facility in Fukuoka Prefecture by the fiscal year of 2028. Sumitomo Metal plans to increase the production of rare metals used in fuel cells starting from the fiscal year of 2026.
However, Yoshikiyo Shimamine, a researcher at the First Life Institute in Japan, frankly stated that due to China's “abysmally low” smelting costs, Japan is currently unable to compete with China. China has established integrated facilities for mining and smelting, and currently accounts for approximately 70% of the world's supply of rare earth ores. It also holds a market share of over 90% in the global refining industry.
Seeing that they cannot compete with Chinese companies, the Japanese government has decided to counter China's dominance in collaboration with the Group of Seven (G7). It is reported that the G7 is discussing setting a minimum price for rare metals, in order to engage in unfair competition with Chinese companies.
UK Financial Times mapping
In November last year, tensions between China and Japan escalated. As soon as Kaori Takahashi took office, she made statements claiming that "Taiwan would be at risk if something happened there," and she also engaged in frequent military-related activities. The Chinese side has taken several measures in response.
According to a previous report by Nikkei Asia, China announced in January this year that it would strengthen controls on the export of dual-use items to Japan, thereby increasing economic pressure on Japan. Especially in March and April this year, China’s exports of rare earths to Japan dropped by more than 80% year-on-year, forcing Japanese companies to quickly seek alternative suppliers such as Australia and India.
However, finding alternative solutions is not easy. A senior executive of a large Japanese manufacturer expressed concern: "If this situation continues, domestic production in Japan will be disrupted, and factories may be forced to shut down."
Recently, there were reports stating that according to Chinese customs data, China has suspended the export of certain rare earth products to Japan for four months. The Japanese side is complaining bitterly. Japanese media mentioned that at the request of Japan, the United States has intervened and asked China to resume exports of rare earths to Japan.
On June 9, Lin Jian, a spokesperson for the Ministry of Foreign Affairs, stated that for the specific details you mentioned, it is recommended to consult the relevant Chinese authorities. I would like to emphasize that China, in accordance with laws and regulations, prohibits the export of all dual-use items to Japanese military users, military purposes, and any other end-users or uses that contribute to enhancing Japan's military strength. The purpose of this measure is to prevent Japan from attempting to militarize again and pursuing nuclear capabilities.
