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RIYADH: Saudi Arabia and Japan are strengthening their long-standing bilateral commerce relations within the vitality sector as each international locations pursue widespread objectives in direction of decarbonization and financial diversification.

Whereas the allied nations are shifting nearer in quite a few areas, one crucial sector during which each have a shared need for progress is within the discipline of mineral growth and mining.

Each international locations need to additional put money into uncommon earth sources which are essential within the manufacturing of electrical automobiles. Their shared curiosity on this phase of the vitality sector comes as demand for EVs will increase amid a world push in direction of decarbonization.

Bulletins of expanded enterprise relations between the 2 nations got here on July 16 on the Ritz Carlton in Jeddah, when Japanese Prime Minister Fumio Kishida met with Saudi Crown Prince and Prime Minister Mohammed bin Salman.

There they set the course for robust commerce ties via the change of 26 pre-signed financial agreements. These embrace the fields of healthcare, mining, clear vitality and digital innovation.

On the sidelines of Fumio’s go to, Saudi Vitality Minister Prince Abdulaziz bin Salman confused how Saudi Arabia and Japan, whose relationship spans 50 years, are essential strategic companions within the vitality sector, based on the Saudi Press Company.

The alliance, he mentioned, has performed an necessary function in strengthening the Kingdom’s pathway to reaching the objectives said in its Imaginative and prescient 2030 agenda in direction of financial progress, diversification and social transformation.

Saudi Funding Minister Khalid Al-Falih, additionally in attendance, emphasised how crucial Japan is as an financial associate, including: “The assembly is a sworn statement to how robust our financial relations are.”

Based on Al-Falih, the Kingdom’s gross home product is now 66 % increased than earlier than the launch of Imaginative and prescient 2030. “Our overseas direct funding has additionally elevated considerably by 120 %,” he added. 

Japan’s industrial advanced has this want and Saudi Arabia’s mineral wealth is a possible supply to realize this objective, whether or not from Saudi Arabia or different locations the place the 2 international locations can make investments collectively.

Ali Husein Alireza, managing director of Haji Husein Alireza & Co. Ltd

Japan’s vitality relationship with Saudi Arabia continues to progress.

In December 2022, the allied international locations signed two units of cooperation agreements within the fields of hydrogen, gas ammonia and carbon recycling, strengthening the present relationship based totally on purchaser and provider of crude oil.

The 2 nations adhere to the Framework Conference on Local weather Change rules and the Paris Settlement by working in direction of a round financial system and applied sciences that adhere to recycling.

Japan plans to be solely carbon-neutral by 2050 and Saudi Arabia is actively in search of to diversify its oil-based financial system, significantly via new initiatives carried out beneath its Imaginative and prescient 2030 agenda.

Mining and mining growth are thus necessary sectors of progress for each nations.

“Uncommon earth metals are important uncooked supplies for a variety of functions,” Giovanni Staunovo, commodity analyst at UBS International Wealth Administration advised Arab Information.

“They probably additionally play a key function within the vitality transition, as these components along with different crucial metals are utilized in wind generators, photo voltaic panels, electrical automobiles and batteries,” he added.

Staunovo argued that “important investments” throughout a spread of vitality sources are set to proceed as world demand will increase.

“To keep away from an excessive amount of dependence on the first provider of uncommon earth, China, it is sensible to diversify and look to different suppliers,” he mentioned. 

An important uncommon earth aspect is neodymium, which is used as magnets for exhausting drives, audio system and electrical motors. That is adopted by dysprosium, terbium and praseodymium, that are all  generally used as components in neodymium magnets.

Japan has been working to diversify its sources of uncommon earth metals since its imports have elevated in recent times because of the rising output of EVs, wind generators and different merchandise that use everlasting magnets.

In January, Japan amended its Mining Act to focus on uncommon earth minerals, recognizing their significance to gas a shift in direction of inexperienced vitality amid elevated market calls for for EVs and different merchandise.

Saudi Arabia is equally looking for new uncommon earth deposits at dwelling as a part of its Imaginative and prescient 2030 technique.

Based on the Ministry of Trade and Mineral Sources, Saudi Arabia possesses over 20 various kinds of minerals, together with gold, iron, copper, granite and marble. Sources at present being mined within the Kingdom embrace iron, copper and zinc.

In March, the ministry introduced indicative timelines for the bidding cycle of 5 new mineral exploration alternatives showcased on the Future Minerals Discussion board 2023 in January in Riyadh. The transfer marks a strategic shift within the Kingdom in direction of the invention and extraction of metals and minerals aiding the nation’s transition in direction of inexperienced vitality.

Such new funding alternatives purpose to discover the mineral sources within the Kingdom, diversify its financial system away from an oil-based carbon financial system and obtain the objectives of Imaginative and prescient 2030 by elevating the mining sector’s contribution to the GDP to $64 billion by 20230. Furthermore, by investing in mining, the Kingdom goals to diversify its financial system and solidify mining because the third pillar of the nationwide trade.

As a part of this, in Could, Saudi Arabia issued 34 new minings licenses, bringing the whole variety of permits within the trade to 2,365.

Of these 1,475 licenses are for constructing supplies quarries and 644 for exploration.

Saudi businessman Ali Husein Alireza, managing director of Haji Husein Alireza & Co. Ltd, advised Arab Information that the Kingdom and Japan “complement one another” in relation to the mineral exploration trade.

“Japan’s industrial advanced has this want and Saudi Arabia’s mineral wealth is a possible supply to realize this objective, whether or not from Saudi Arabia or different locations the place the 2 international locations can make investments collectively,” he mentioned.

Reza additional emphasised how Saudi Arabia may also profit from increasing its minerals trade and gaining technical data and know-how within the sector through the use of Japanese experience, including how the strengthened financial ties “provide an overlapping need within the enterprise sector to deal with world demand for minerals a lot wanted for the industries of the longer term.”

Presently, solely a handful of nations produce a lot of the world’s uncommon earth minerals, together with components utilized in EV batteries akin to cobalt and lithium.

China produces 70 % of the worldwide manufacturing of uncommon earth metals, adopted by the US, Myanmar, Australia and Thailand, which collectively account for twenty-four % of the remaining mine manufacturing, based on Mineral Commodity Summaries 2023, a report launched by the US Division of the Inside.

“China dominates the market of uncommon earths, because the significance of uncommon earth minerals is ready to extend over time because of their utilization in electrical automobiles — the place they’re used as everlasting magnets. Japan’s 2050 net-zero goal has an enormous China threat difficulty,” Viktor Katona, head of oil evaluation at Kpler, advised Arab Information.

“Whereas the US is the second-largest, uncommon earth aspect producer globally, with some 13-14 % of world provide, it’s unlikely to share it extensively even with strategic allies as home producers would search to clinch offers and maintain the minerals at dwelling,” added Katona, concluding: “Consequently, Japan has a sourcing drawback. The most important, rare-earth sources are in geopolitically inconvenient international locations — China, Russia, Vietnam and even Brazil could be in opposition to Japanese entry into their markets.”