Building critical minerals supply chains outside China

Overview

For more than two decades, China has refined nearly every rare earth element that goes into a smartphone, fighter jet, electric motor, or wind turbine. On May 4, Japanese Prime Minister Sanae Takaichi and Australian Prime Minister Anthony Albanese committed up to A$1.3 billion (about US$937 million) to mining and processing projects. These projects aim to give Japan a non-Chinese source for gallium, nickel, graphite, rare earths, and fluorite.

The deal is the latest brick in a parallel supply chain that allied governments have been quietly building since China cut off rare earth exports to Japan in 2010. The joint statement named the problem out loud: 'economic coercion' and Chinese export restrictions. Whether that parallel chain can deliver materials at competitive prices and at scale before China's next squeeze is the open question.

Why it matters

If allied supply chains hold, China loses a tool it has used to pressure Japan, the U.S., and Europe; if they fail, the next export ban hits harder than the last.

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Key Indicators

A$1.3B

New Australian commitment

Funding for critical-mineral projects with Japanese involvement announced May 4, 2026.

~90%

China's share of rare earth processing

Beijing controls the midstream refining step where ore becomes usable material.

58%

Japan's remaining China dependency

Down from roughly 85% in 2009 after a 15-year diversification push.

Targeted minerals

Gallium, nickel, graphite, rare earths, and fluorite — all flagged in recent Chinese export controls.

Nov 2026

China suspension expires

Beijing paused several new export controls until late 2026 pending bilateral review.

A$10B

Companion warship deal

Japanese-designed frigates Australia ordered weeks before the minerals agreement.

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People Involved

Sanae Takaichi

On three-day state visit to Australia

Anthony Albanese

Hosting Takaichi; expanding minerals reserve commitments

Organizations Involved

Japan Organization for Metals and Energy Security (JOGMEC)

Japanese government agency

Primary vehicle for Japanese investment in foreign mineral projects

Government agency that takes equity stakes and signs offtake agreements with overseas mining and processing projects to secure supply for Japanese industry.

Australian Critical Minerals Strategic Reserve

Australian government program

Operational from second half of 2026

Government program that uses offtake agreements and selective stockpiles to give Canberra leverage over how Australian critical-mineral output is sold.

Ministry of Commerce of the People's Republic of China (MOFCOM)

Chinese government agency

Administers critical-mineral export controls

The Chinese ministry that has imposed and then conditionally suspended a series of export controls on rare earths, gallium, germanium, antimony, graphite, and tungsten since 2023.

Timeline

September 2010 May 2026

9 events Latest: May 4th, 2026 · 1 month ago

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May 2026
Takaichi and Albanese sign critical-minerals, energy, and defense agreements
Latest Agreement

Australia commits up to A$1.3 billion (US$937 million) to projects involving Japanese partners, targeting gallium, nickel, graphite, rare earths, and fluorite. Joint statement explicitly cites economic coercion.
May 4th, 2026
April 2026
Australia signs A$10 billion deal for Japanese-designed frigates
Defense

Defense ministers contract for the first three of an eleven-ship fleet, anchoring the strategic side of the bilateral relationship.
April 2026
November 2025
China suspends most new export controls until November 2026
Trade restriction

MOFCOM pauses Announcement 46 and related measures pending bilateral review, leaving the door open to reimposition.
November 7th, 2025
October 2025
China announces new export controls on critical minerals
Trade restriction

MOFCOM Announcement 46 expands licensing requirements for rare earths, gallium, germanium, antimony, graphite, and superhard materials shipped to the U.S.
October 9th, 2025
April 2025
Australia announces A$1.2 billion Critical Minerals Strategic Reserve
Policy

Albanese commits funding for offtake agreements and selective stockpiles, with antimony, gallium, and rare earths as the first focus.
April 24th, 2025
August 2023
China imposes gallium and germanium export licensing
Trade restriction

Beijing requires export licenses for two semiconductor inputs, citing national security. Western buyers see prices spike and shipments slow.
August 2023
2011
JOGMEC backs Lynas rare earth project in Australia
Investment

A loan and offtake deal helps stand up the first sizable rare earth supply outside China.
2011
October 2010
Japan launches diversification program
Policy

Tokyo allocates roughly $1.2 billion to reduce rare earth dependency through investment, recycling, and substitution research.
October 2010
September 2010
Senkaku trawler incident triggers China's first rare earth cutoff
Trigger event

After Japan detained a Chinese fishing captain near disputed islands, China halted rare earth exports to Japan. Tokyo's 90% dependency became a national-security problem overnight.
September 7th, 2010

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

September-November 2010

China's rare earth cutoff to Japan (2010)

After Japan detained a Chinese fishing trawler captain near the disputed Senkaku/Diaoyu islands, China halted rare earth exports to Japan. At the time, Japan sourced roughly 90% of its rare earths from China — materials essential for hybrid car motors, hard drives, and precision electronics. Prices for some elements rose tenfold within months.

Then

Japan released the captain within weeks. Tokyo also pushed an emergency $1.2 billion supplemental budget for diversification, recycling, and substitution research.

Now

Japan cut its Chinese rare earth dependency from about 85% in 2009 to roughly 58% by 2020. The cutoff also pushed allied governments to recognize critical minerals as a national-security category — the foundation of every program now in motion.

Why this matters now

The 2010 episode is the template. The current Australia-Japan deal is the same playbook — government money, foreign offtake, allied diversification — extended to a wider list of minerals and a wider list of importing countries.

August 2022

U.S. CHIPS and Science Act (2022)

Washington committed roughly $52 billion in subsidies and tax credits to bring semiconductor manufacturing back to the U.S., after years of watching capacity concentrate in Taiwan and South Korea. The bill paired direct grants to chipmakers with export controls on advanced chip equipment to China.

Then

TSMC, Intel, Samsung, and Micron announced major U.S. fab projects; first fabs broke ground but ran into labor and permitting delays.

Now

Still being judged. Early evidence suggests subsidies alone do not close cost gaps with established Asian suppliers without ongoing state support — a warning for any allied effort to replicate Chinese mineral processing.

Why this matters now

The CHIPS Act is the most recent test of whether industrial-policy money can actually relocate a strategic supply chain. The Australia-Japan minerals push faces the same core question: can subsidized Western projects compete on price with the dominant low-cost incumbent, or do they need permanent protection to survive?