By Trevor Hunnicutt and Katya Golubkova
TOKYO (Reuters) -U.S. President Donald Trump and Japanese Prime Minister Sanae Takaichi signed a framework agreement on Tuesday for securing the supply of rare earths, as both countries aim to reduce China’s dominance of some of the key electronic components.
The leaders signed the documents, which included critical minerals, at the neo-Baroque-style Akasaka Palace in Tokyo, beneath three chandeliers decorated from top to bottom with gold ornamentation, as aides applauded.
No direct mention was made publicly by the leaders about China, which processes over 90% of the world’s rare earths, making it the source of each country’s concern about its mineral supply chain. Beijing has recently expanded export curbs.
Trump and Chinese President Xi Jinping are set to meet on Thursday on the sidelines of the Asia-Pacific Economic Cooperation in South Korea to discuss a deal that would pause steeper U.S. tariffs and Chinese rare earths export controls.
Japan and the U.S. would use economic policy tools and coordinated investment to speed up the “development of diversified, liquid, and fair markets for critical minerals and rare earths”, and aim to provide financial support to selected projects within the next six months, the White House said.
Both countries would consider a mutually complementary stockpiling arrangement and cooperate with other international partners to ensure supply chain security, it added in a statement.
While dominated by China, the U.S. and Myanmar control 12% and 8% of global rare earth extraction, according to Eurasia Group, and Malaysia and Vietnam cover another 4% and 1% of processing, respectively.
U.S. ENERGY SUPPLIES
Japan has pledged a $550 billion investment into the U.S. economy, part of the wider bilateral trade deal, which could include power generation and liquefied natural gas, among other areas, according to sources familiar with the talks.
Ahead of Trump’s Asia trip, the U.S. called on Russian energy buyers, including Japan, to cease imports, and imposed sanctions on Moscow’s two biggest oil exporters – Rosneft and Lukoil – to push the Kremlin to the negotiation table to end the war in Ukraine.
Japan has stepped up U.S. LNG purchases in the last few years as it tries to diversify away from its key supplier Australia and prepare for supply contract expirations from Russia’s Sakhalin-2 LNG project, which Mitsui and Mitsubishi helped to launch in 2009.
In June, JERA, Japan’s top LNG buyer, agreed to buy up to 5.5 million metric tons per annum of U.S. LNG under 20-year contracts, with deliveries starting around 2030. This is roughly the same amount Japan imports annually from Sakhalin-2.
Most supply from Sakhalin-2, which covers 9% of Japan’s gas needs, ends in 2028-2033. Japan buys less than 1% of its oil imports from Russia under a sanctions waiver, with the bulk of its oil supply covered by the Middle East.
Last week alone, Japan’s biggest city gas supplier, Tokyo Gas, signed a preliminary deal to buy 1 million metric tons per annum of LNG from the Alaska LNG project, following a similar announcement from JERA in September.
JERA pledged $1.5 billion for gas assets in Louisiana in its first foray into upstream production in the U.S., where Tokyo Gas and Mitsui are already present.
To keep electricity prices in check, Japan wants to continue Sakhalin-2 LNG imports, a senior official has said, as it takes only a few days to deliver LNG to Japan compared to around a week from Alaska and roughly a month from the U.S. Gulf Coast.
“The U.S. said it wants Japan to stop importing Russian energy – but this is Japan’s closest LNG source and which is also cheap,” said Nobuo Tanaka, chief executive with Tanaka Global, Inc. advisory.
“I think the question should be framed this way: can the U.S. provide Japan with LNG as cheap as what currently comes from Russia? Can gas from Alaska be that affordable?”
(Reporting by Katya Golubkova and Trevor Hunnicutt in Tokyo, additional reporting by Kanishka Singh in Washington, DC; Editing by Himani Sarkar and Stephen Coates)
