Emerging Alternative Suppliers, and Strategic Implications for Japan
December 2025 Edition
- Introduction: A Strategic Resource Under Systemic Stress
- China’s Rare Earth Strategy: From Export Restrictions to Selective Supply Control
- The Rise of Alternative Rare Earth Supply Regions
- Global Outlook: Multipolar Growth, Persistent Chinese Dominance
- Strategic Implications for Japan and JBIC
- Conclusion: Partial De-Chinaization Is Underway—Japan Must Prepare for the Next Phase
Introduction: A Strategic Resource Under Systemic Stress
Rare earth elements (REEs) underpin critical sectors such as EV motors, precision electronics, wind turbines, and defense systems.
For over two decades, the global supply chain has relied overwhelmingly on China’s dominance in mining, processing, and magnet production.
Since 2024–2025, however, China’s tightening export controls and technology restrictions have triggered a structural shift in the global rare earths landscape.
At the same time, alternative suppliers—Australia, the United States, Brazil, and African nations—are strengthening their positions.
This report synthesizes:
- China’s strategic motivations and policy trajectory,
- The capabilities and limitations of alternative suppliers, and
- Strategic implications for Japan and JBIC,
with the aim of informing high-level decisions in government, finance, and industry.
China’s Rare Earth Strategy: From Export Restrictions to Selective Supply Control
2.1 Comprehensive Export Controls on Materials, Technology, and Equipment
In 2025, China expanded export controls to encompass the entire REE value chain, including:
- Mining and extraction
- Refining and separation
- Magnet manufacturing
- Recycling technologies
- Specialized equipment
- Offshore technology transfer (“deemed exports”)
This framework means that even non-Chinese downstream production using Chinese-origin technology or materials may require Chinese approval.
Strategic effect:
China strengthens structural dependence on its processing ecosystem, not merely on raw material exports.
2.2 Targeted Restrictions on Heavy Rare Earths
In April 2025, Beijing intensified controls on seven heavy REEs—such as dysprosium and terbium—critical for high-performance magnets used in EVs, energy systems, and defense technologies.
Implication:
China is explicitly exerting leverage over sectors central to the digital and green economy.
2.3 Introduction of “General Licenses”: Selective, Not Liberalized, Supply
In December 2025, China granted general export licenses to major magnet producers (e.g., JL Mag, Ningbo Yunsheng, Zhong Ke San Huan), enabling year-round exports to designated clients.
This marks a shift toward predictable yet controlled supply, balancing two objectives:
- Prevent global supply chain disruption and reputational damage.
- Preserve Beijing’s ability to tighten or loosen supply based on strategic considerations.
China’s model:
→ Not a full embargo, but a managed trade regime that determines who, how much, and for what purpose receives REEs.
2.4 Summary: The Logic of China’s Strategy
China is pursuing:
- Domestic capture of value-added stages (processing, magnet production, and recycling).
- Geoeconomic leverage through export controls.
- A framework that preserves optionality—China can constrain supply without fully disrupting global markets.
- Control not just of materials, but of know-how and production equipment, locking competitors into long-term dependence.
The Rise of Alternative Rare Earth Supply Regions
Australia: The Most Credible Non-China Supply Chain
Strengths
- Large, high-quality REE reserves
- Strong government backing for critical minerals
- New refining/separation facilities coming online
- Significant foreign investment (Japan, US, EU)
Constraints
- Full “mine-to-magnet” capability not yet established
- High operating costs relative to China
Assessment
→ Australia is the most realistic mid-term anchor for non-Chinese REE supply chains.
Strong candidate for investment and long-term offtake arrangements by Japan and JBIC.
United States: Rich Resources, Limited Processing Capacity
Strengths
- Substantial reserves (e.g., Mountain Pass)
- Policy momentum driven by defense and clean energy needs
- IRA incentives supporting domestic mineral processing
Constraints
- Limited refining, separation, and magnet-making capability
- Environmental constraints and high costs
- Multi-year timeline for building a complete supply chain
Assessment
→ A future heavyweight, but not a short-term stabilizer.
Japan cannot rely on U.S. REE supply within the next 3–5 years.
Brazil, South America, and Africa: High Potential, Long Timelines
Strengths
- Significant heavy-REE deposits
- Increasing strategic engagement from Western countries
- Potential to diversify supply away from Asia
Constraints
- Weak infrastructure
- Almost no downstream processing
- Political and governance risks
Assessment
→ Promising sources for the 2030s.
However, building mine-to-processing capacity requires long-term investment, potentially involving JBIC and multilateral partnerships.
Global Outlook: Multipolar Growth, Persistent Chinese Dominance
| Stage of Value Chain | China’s Share | Implication |
|---|---|---|
| Mining | ~60% | Alternatives viable |
| Processing/Separation | ~90% | Critical bottleneck |
| Magnet Production | ~85% | China holds scale and cost advantages |
Key insight:
Even as mining diversifies, processing remains the chokepoint.
China’s dominance will persist for 5–10 years, barring major coordinated investment.
Strategic Implications for Japan and JBIC
Supply Risk Intensifying Under China’s Selective-Control Framework
Risks for Japan include:
- Volatility in heavy-REE supply critical for EVs and defense
- Higher procurement costs for magnets and motor components
- Potential constraints on China-origin technologies used abroad
- Increased vulnerability to geopolitical shocks
The most significant risk is Sudden Supply Compression—a targeted reduction rather than a full embargo.
Recommended Mid-Term Strategy for Japan (3–7 Years)
1. Strengthen diversified, long-term offtake relationships
- Australia, Brazil, and selected African states
- Combine equity investment + processing-facility finance + multi-year contracts
2. Build domestic processing and magnet production capability
- Japan possesses strong materials science expertise
- Critical to reduce dependence on China’s 90% processing monopoly
3. Accelerate REE recycling and circular-economy supply
- Japan has world-class technologies
- Can mitigate price and supply volatility more quickly than mine development
Strategic Role for Japan
Economist can become a central instrument in Japan’s economic security by supporting:
- Integrated investment across mining and processing facilities in non-China regions
- Equity and debt financing for magnet manufacturers outside China
- Risk-sharing finance for high-risk jurisdictions (Brazil, Africa)
- Credit enhancements for Japanese firms’ long-term offtake agreements
JBIC’s ability to absorb political, price, and startup risks will be crucial for enabling new global supply chains.
Conclusion: Partial De-Chinaization Is Underway—Japan Must Prepare for the Next Phase
Global REE supply chains are moving toward multipolarity, but with persistent Chinese structural dominance.
China is not isolating itself; instead, it is designing a supply architecture that maximizes strategic leverage while maintaining global influence.
For Japan, the challenge is clear:
- Diversify supply
- Develop domestic processing and magnet capacity
- Expand recycling
- Use financial tools (JBIC) to secure long-term stability
Japan’s industrial competitiveness—and its economic security—will increasingly depend on how quickly these measures are executed.
