Japan and Saudi Arabia seek common ground on mining sector development

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

Whereas the allied nations are transferring nearer in quite a few areas, one vital sector by which each have a shared need for development is within the subject of mineral improvement and mining.

Each international locations want to additional put money into uncommon earth sources which might be essential within the manufacturing of electrical automobiles. Their shared curiosity on this section of the power sector comes as demand for EVs will increase amid a world push in the 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 sturdy commerce ties by the trade of 26 pre-signed financial agreements. These embody the fields of healthcare, mining, clear power and digital innovation.

On the sidelines of Fumio’s go to, Saudi Vitality Minister Prince Abdulaziz bin Salman careworn how Saudi Arabia and Japan, whose relationship spans 50 years, are essential strategic companions within the power sector, in accordance with the Saudi Press Company.

The alliance, he mentioned, has performed an essential function in strengthening the Kingdom’s pathway to attaining the objectives acknowledged in its Imaginative and prescient 2030 agenda in the direction of financial development, diversification and social transformation.

Saudi Funding Minister Khalid Al-Falih, additionally in attendance, emphasised how vital Japan is as an financial associate, including: “The assembly is an affidavit to how sturdy our financial relations are.”

In line with Al-Falih, the Kingdom’s gross home product is now 66 % greater 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 complicated 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 power 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, gasoline ammonia and carbon recycling, strengthening the present relationship based 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 the direction of a round financial system and applied sciences that adhere to recycling.

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

Mining and mining improvement are thus essential sectors of development for each nations.

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

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

Staunovo argued that “vital investments” throughout a spread of power 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 smart to diversify and look to various suppliers,” he mentioned. 

Crucial uncommon earth component is neodymium, which is used as magnets for onerous 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 as a result of 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 gasoline a shift in the direction of inexperienced power 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.

In line with the Ministry of Business and Mineral Assets, Saudi Arabia possesses over 20 several types of minerals, together with gold, iron, copper, granite and marble. Assets at present being mined within the Kingdom embody 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 the direction of the invention and extraction of metals and minerals aiding the nation’s transition in the direction of inexperienced power.

Such new funding alternatives intention 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 entire 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, instructed Arab Information that the Kingdom and Japan “complement one another” in terms of the mineral exploration trade.

“Japan’s industrial complicated 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 also can profit from increasing its minerals trade and gaining technical information and know-how within the sector by utilizing Japanese experience, including how the strengthened financial ties “supply an overlapping need within the enterprise sector to deal with world demand for minerals a lot wanted for the industries of the long run.”

Presently, solely a handful of nations produce many of the world’s uncommon earth minerals, together with parts utilized in EV batteries reminiscent of 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, in accordance with 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 about to extend over time attributable to their utilization in electrical automobiles — the place they’re used as everlasting magnets. Japan’s 2050 net-zero goal has an enormous China threat situation,” Viktor Katona, head of oil evaluation at Kpler, instructed Arab Information.

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