G7 pledges $13 bil in fiscal support for critical minerals projects

Japan earmarks largest ever budget for minerals developments

'Various pathways' for net zero, gas sector investment key G7 results

Japan will boost critical mineral resources development together with the G7 and other "like-minded countries" as part of its efforts to bolster its economic security, a top government official told S&P Global Commodity Insights May 26, with Tokyo having secured a record supplementary budget of more than Yen 200 billion ($1.4 billion) for mineral resources this year.

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"The security of critical minerals will be extremely important for energy transition from now on so that we are putting an emphasis and strengthening our efforts on mineral resources," said Ryo Minami, deputy commissioner for international affairs, and director-general for international policy on carbon neutrality at the Ministry of Economy, Trade and Industry's Agency of Natural Resources and Energy.

The move comes as the G7 adopted April 16 the "Five-Point Plan for Critical Minerals Security" at its Sapporo climate and energy ministerial meeting.

The plan called for developing a "plausible forecast" of medium and long-term supply and demand for critical minerals; developing resources and supply chains responsibly; recycling more and sharing capabilities; saving resources through innovations; and preparing for supply disruptions.

Demand is expected to soar for lithium, nickel, cobalt and other metals needed for batteries and electrification technologies. Supply chains to bring the commodities to market face numerous challenges, and refining capacity is heavily concentrated in a few countries.

"As Japan relies on imports of the bulk of critical minerals, we will find it difficult to proceed with clean energy transition should the current situation stay as it is," Minami said in an interview. "We believe an increase in dependency to specific countries [for critical minerals] would aggravate vulnerability for the economic security."

"We also see moves for resource nationalism in some countries pose risk for a resource importing country like Japan," said Minami, adding that this is why it is important to work with countries facing similar situations and sharing common values of market-driven critical minerals trades.

Top nickel producer Indonesia, for example, banned exports of nickel ore in 2020, which spurred local investment in downstream processing as part of its plan to move up the value chain. On the back of that policy, the Indonesian government had promised to ban all raw metal exports starting June 1 but it appears to have pulled back from those plans while it builds smelting capacity.

Record budget

G7 countries have pledged $13 billion in fiscal support for domestic and international critical mineral projects aimed at promoting private sector investment on the premise of high environmental, social and governance standards, according to the Five-Point Plan for Critical Minerals Security.

"As for Japan, we have secured more than Yen 200 billion fiscal supports for upstream to midstream developments," Minami said of the supplementary budget secured for mineral resource developments focused on critical minerals for this year.

Minami said that this is Japan's first budget of its kind and the largest supplementary budget earmarked for mineral resources, adding that it will be used for equity investment and feasibility studies for mineral resources projects.

Aside from the G7 countries, Japan sees Australia as an "extremely important" partner among "like-minded countries" for developing critical minerals supply chains, Minami said.

Japan is also part of the Minerals Security Partnership formed together with the US, Canada, Australia, Finland, France, Germany, South Korea, Sweden, the UK and the EU in 2022, with the goal of ensuring that critical minerals are produced, processed and recycled in a manner that "supports the ability of countries to realize the full economic development benefit of their geological endowments."

Asked whether Japan is looking to expand its rare metals stockpiles, Minami said the country has already expanded its rare metals stockpiles to 35 minerals that are currently difficult to be replaced and highly dependent on supply countries.

"We are stockpiling minerals other than rare earth for the economic security," he said, declining to elaborate on stocked minerals. "Of course, we hope to further enhance effectiveness of the stockpiles system."

G7 takeaways

Asked to comment on results from the G7 Hiroshima Summit ended May 21, Minami pointed out three key takeaways, with the leaders committing to "holistically addressing energy security, the climate crisis and geopolitical risks;" recognizing "various pathways" to pursue a common goal of net zero by 2050; and investment in the gas sector to be "appropriate" in response to the current energy crisis and potential gas supply shortfalls.

"Speaking of geopolitical risks specifically, such situations as various resources and clean energy technology depending on specific countries is not favorable for clean energy transition from now on," Minami said.

As all countries have various situations with regard to energy and other conditions, Minami said that the G7 leaders had agreed on a need to pursue various pathways because this would be more a efficient and effective way of achieving net-zero.

"We believe pursuing transition not following each country's realities would not be efficient, as well as it would not be effective at the end," he said.

"It was also an important point of agreement in investment in the gas sector to be appropriate as part of response to the current crisis and to address potential gas market shortfalls," he added.

"Following such key results bear fruit at the G7, we hope to work with more like-minded countries to advance policy together from here on."

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