China Is Overplaying Its Rare-Earth Hand in Japan

Core Viewpoint - China's recent ban on exports of items with potential military applications to Japan, including rare-earth elements, is a strategic move in response to geopolitical tensions, particularly regarding Taiwan [2]. Group 1: Impact on Rare-Earth Supply Chain - The immediate target of China's export ban is rare-earth magnets, which are essential in various technologies, including electric vehicles and military applications [3]. - Japan has prepared for such threats by diversifying its supply chains and building stockpiles since a similar situation in 2010, making it less vulnerable to China's actions [4]. - Despite China producing about 80% of the world's neodymium magnets, Japan manufactures approximately half of the remaining supply, indicating a strong domestic capability [5]. Group 2: Global Response and Market Dynamics - Japan's previous experiences with China's export restrictions have led to minimal disruption, as companies like Shin-Etsu Corp. maintained operations during past crises [6]. - Other regions, such as Europe and India, have faced challenges due to China's export licensing processes, leading to production halts in some sectors [7][8]. - Japan still relies on China for about 70% of its rare-earth supplies, highlighting the ongoing dependency despite diversification efforts [9]. Group 3: Global Production Renaissance - China's export restrictions have inadvertently spurred a global increase in rare-earth production facilities, with new plants emerging in various countries, including the US, France, and Australia [10]. - Establishing rare-earth facilities is complex but less challenging than creating advanced semiconductor supply chains, suggesting a shift in geopolitical leverage [11]. - Companies like Neo Performance Materials and Solvay SA are rapidly developing new production capabilities for rare-earth elements, indicating a growing global response to China's dominance [12]. Group 4: Long-Term Implications - China's overt display of control over rare-earth resources may weaken its long-term position as rival facilities are developed worldwide, countering its influence [13].