A chemical factory in the Kawasaki area of Japan. Japan is working to establish a domestic rare earth production base, including plans to build new rare earth processing facilities in central-northern Honshu. [Getty Images]
A chemical factory in the Kawasaki area of Japan. Japan is working to establish a domestic rare earth production base, including plans to build new rare earth processing facilities in central-northern Honshu. [Getty Images]

Japan has begun working to establish a domestic rare earth production base after Chinese export restrictions dealt a severe blow to its supply.

Shin-Etsu Chemical, a major chemical company, plans to build at least two new rare earth production facilities in Fukui Prefecture in central-northern Honshu, the Nikkei reported Thursday. The company plans to invest at least 35 billion yen (approx. 330 billion won, $218 million) in smelting facilities in the prefecture, with the Japanese government covering half the cost through subsidies.

Mitsui Mining and Smelting plans to invest 10 billion yen (approx. 95.1 billion won) to establish a rare earth development hub in Fukuoka Prefecture by 2028. Sumitomo Metal Mining said it would increase output of rare earths used in fuel cells this year.

The new smelting facilities would mark Shin-Etsu Chemical's first domestic construction of such infrastructure since 2008. Japan's mineral materials industry had largely exited the rare earth market in the 1990s, when China began developing the sector as a core industry and flooded global markets with low-cost supply. Importing cheap Chinese rare earths proved more economical than managing the complex refining and smelting processes — and the resulting pollution — at home.

China has since come to control roughly 90 percent of global rare earth production, making the materials a centerpiece of its economic leverage strategy. Last year, as relations between the two countries soured following Japanese Prime Minister Sanae Takaichi's remarks about potential intervention in a Taiwan contingency, Chinese authorities responded with a series of retaliatory measures — including a travel advisory against Japan — before moving to restrict rare earth exports to the country. Recent analysis shows Japan's imports of Chinese rare earths fell 80 percent in March and April.

Japan currently accounts for just 1 percent of global rare earth production. The government and industry are working to diversify the supply chain through partners including Australia and India, while simultaneously rebuilding domestic production and smelting capacity to recover from what has been called a "rare earth shock."


kate01@heraldcorp.com