Case Study Details - Securing Minerals for Energy and Technologies - Institutional Frameworks for Securing Critical Mineral Supply Chains

Institutional Frameworks for Securing Critical Mineral Supply Chains: Advancing Diversification, Risk Mitigation, and Sustainable Access through Government-backed Entities

Context

Around the world, governments are increasingly recognizing the strategic importance of critical minerals for economic security and the energy transition. National institutions have been created to reduce dependency on single suppliers, support high-risk exploration, and build resilient, sustainable supply chains through financial tools and international partnerships.

One example is Japan’s JOGMEC—the Japan Organization for Metals and Energy Security. It was established in 2004 by an integration of the Metal Mining Agency and Japan National Oil Corporation, and it comes under the country's Ministry of Economy, Trade and Industry (METI). It helps with policy implementation that ensures diversification of supply chains and reduces dependencies on single sources. At the heart of JOGMEC’s strategy has been a focus on investments in mines abroad and innovation of new technologies to reduce the use of rare earths.[i]

Challenge

Japan faced several interlinked challenges in securing critical mineral supply:

Need for diversification: Japan’s reliance on China for over 90% of its rare earth element imports exposed it to supply chain risks. In response, Japan pursued diversification not only to reduce vulnerability to potential trade disruptions but also to enhance the overall resilience and stability of its critical minerals supply chain[ii]
Investment risks: The inherent risks of mining projects made it challenging to attract sufficient private capital. To help de-risk investment and catalyze exploration and development, the Japanese government provided support through JOGMEC.
ESG standards: To meet increasing sustainability and ESG requirements, Japan recognized the need for an institutional mechanism to support companies in aligning with these standards.
Technological gaps: Limited domestic capabilities in certain stages of the critical minerals value chain posed a challenge to Japan’s industrial competitiveness, requiring increased investment and innovation to close the gap.
Competition: With other countries accelerating efforts to secure critical mineral supply chains, Japan faced increased pressure to respond swiftly in order to safeguard consistent and reliable access to key materials.

Solution

JOGMEC has applied a range of measures to help address challenges facing Japan, including:

Equity and debt support: provide funding to Japanese companies to support mineral exploration, development and production projects. This helps with risk mitigation and helps in expediting project completion timelines. A notable example was their investment in the Jujuy Olaroz lithium project in Argentina, which helped in provide funding for Japan’s first lithium project[iii]
Debt guarantees: JOGMEC helps in de-risking projects through debt guarantees for development financing and mitigates country risks associated with mining projects
Facilitating PPPs: Through long-term funding and support, JOGMEC facilitates PPPs, as in the case of the Lynas rare earth project in Australia, where they made a $250mn investment which helped in securing a stable supply of rare earths to Japan[iv]
Technological upgrade: Support with innovation, technological development, and recycling/pollution mitigation efforts to advance sustainability
International cooperation: By participating in international initiatives such as the Minerals Security partnership (MSP), where Japan has committed to high ESG standards and transparent sourcing.

Conditions

Key conditions underpinning JOGMEC’s initiatives could inform approaches elsewhere:

Government support: The Ministry of Economy, Trade and Industry has supported with policy frameworks and financial resources for JOGMEC’s initiatives
Strategic investments: Agreements made with resource rich nations such as Namibia and the Democratic Republic of Congo, and subsequent investments, has helped in securing access to critical minerals[v]
Technological expertise: Support for geological surveys and exploration initiatives enabled riskier projects to be undertaken. In 2023, JOGMEC provided equity support to Waterberg PGM project in South Africa to assist in exploration activities[vi]
International alliances: Through partnerships such as the EU-Japan Administrative arrangement on critical raw materials supply chains, JOGMEC has been better able to fulfil its role[vii]

Observed Impact

JOGMEC has had an impact on Japan’s position in critical mineral value chains:

Diversification of supply chains: Reduced reliance on a single country as a supplier, e.g. Import of rare earths from China went from 90% share to 58% share in the past 10 years[viii]
Increased production: New mining and processing projects have strengthened access to key materials
Economic security: Contributed to national objectives around energy transition and long-term resource security
Global leadership: JOGMEC’s example as an institutional framework for securing critical mineral supply can inspire other nations on how to conduct commercial diplomacy for integrating into global critical minerals supply chain

What’s Next for the Southern African Region

The institutional architecture that JOGMEC showcases could serve as an example for stakeholders in Southern African countries to consider

Policy considerations: Setting up a raw materials supply resilience entity like JOGMEC and creating policies that enable equity and debt participation, debt guarantees, etc. for risk mitigation and encourage high risk exploration activities
Public private partnerships: Leveraging strengths of both the sectors could help the SAR countries achieve successful implementation of mining projects
Strategic investments: Focusing on the capabilities that each country brings into the critical minerals value chain, for example technological innovation, sustainability efforts, could create a multiplier effect for the entire region and promote intra-regional cooperation

[i] https://www.newsecuritybeat.org/2024/08/how-to-diversify-mineral-supply-chains-a-japanese-agency-has-lessons-for-all/

[ii] https://www.newsecuritybeat.org/2024/08/how-to-diversify-mineral-supply-chains-a-japanese-agency-has-lessons-for-all/

[iii] https://eneken.ieej.or.jp/data/11784.pdf

[iv] https://www.newsecuritybeat.org/2024/08/how-to-diversify-mineral-supply-chains-a-japanese-agency-has-lessons-for-all/

[v] https://www.jogmec.go.jp/english/news/release/news_10_00046.html

[vi] https://eneken.ieej.or.jp/data/11784.pdf

[vii] https://single-market-economy.ec.europa.eu/news/enhancing-cooperation-japan-critical-raw-materials-supply-chains-through-new-administrative-2023-07-06_en

[viii] https://www.newsecuritybeat.org/2024/08/how-to-diversify-mineral-supply-chains-a-japanese-agency-has-lessons-for-all/

OTHER SOURCES

https://www.jogmec.go.jp/english/stockpiling/metal_10_000003.html

https://www.iea.org/policies/16642-jogmec-jbic-financial-support-for-overseas-minerals-projects

https://www.jogmec.go.jp/content/300375651.pdf