Japan ‘months’ from running out of critical rare earth as China squeezes supply

Japan is months from running out of supplies of yttrium, a critical metal, and has asked the US to push China to ease rare earth export controls that threaten severe disruption to the global automotive, defence and chip industries.

Tokyo made the entreaty to the US government and American blue-chip companies, according to people familiar with the matter in Washington and Tokyo.

Washington has urged China in recent months to increase the flow of rare earths, including yttrium — a heat-resistant metal crucial to manufacturing vehicles, jet engines and semiconductors — to the US and its allies. US defence supply chains rely on components made in Japan that contain yttrium.

Unless Beijing changes tack or western allies find substitutes or additional stockpiles, shortages could emerge as early as the end of this year, Japanese government officials and trading house executives said.

“We’re in a serious situation to keep supplying downstream industries,” said a Japanese government official. “Stockpiles are decreasing and rare earth saving efforts have a limit.”

“The timeline is not years, it’s months and how to survive next year,” the official added. “If everyone acts right now, then it will be OK. If everyone ignores the problem, then it will be a systemic risk to the world economy.”

China dominates the supply chain for mining and processing rare earths, leverage it has used in response to US President Donald Trump’s trade war.

China has also strengthened export controls against Japan in response to Prime Minister Sanae Takaichi’s comments last year about the existential threat to Japan from a conflict over Taiwan, which outraged Beijing.

Yttrium shortages have become the biggest pain point for Japanese materials groups. The metal is used to coat engines and plasma-etching chambers for chip manufacturing.

Yttrium oxide prices outside China have skyrocketed to $1,150 per kilogramme, a 179-fold increase versus two years ago, compared with $9 per kilogramme in China, according to price assessments by Argus.

US and Japanese officials have held numerous talks about the yttrium crunch, including last month in Washington when US energy department officials and Japanese industry ministry officials convened a critical minerals “rapid response group”.

At the meeting, which came two weeks before Trump hosted Chinese leader Xi Jinping at the White House, the Japanese government clarified the gravity of the situation in the hope that US businesses affected by the shortages would also lobby Washington to raise concerns with Beijing.

The US has complained that China is not fulfilling its pledge to ease rare earth controls under the trade truce the two sides reached last October. After Trump met Xi in Beijing in May, China reiterated that pledge to “address US concerns regarding supply chain shortages related to rare earths . . . including yttrium”.

A senior US official told the FT last month that China was fulfilling two-thirds of its rare earth commitments to the US, and was only allowing Japan to procure the bare minimum of its needs.

US officials have told Beijing that the US will not export jet engines needed for the Comac C919 — China’s first domestically made airliner — as production has been constrained by the lack of yttrium, which is critical to making turbines.

China also agreed to buy 200 Boeing jets when Trump visited Beijing in May. But the deal has not been completed, partly due to complications related to critical minerals.

Erin Browne, the top US Treasury official for international affairs, told the FT that rare earths were essential to the production of Boeing aircraft and jet engines.

“In order to produce aircraft, you need rare earths,” said Browne. “They’re all sort of under the same umbrella, which is that in order to . . . export engines, you also need rare earths.”

Japan’s economy ministry and the US Treasury, which is leading the trade talks with China, declined to comment specifically on yttrium.

A senior Treasury official said reliable access to critical minerals was “essential to US economic and national security”.

“Export restrictions that disrupt the flow of critical minerals are a serious concern,” the US official said.

The Chinese embassy in the US did not respond to a request for comment.

“It is rightful panic in Japan,” said Gracelin Baskaran, head of the critical minerals security programme at the Center for Strategic and International Studies in Washington. “They are probably going to have to suffer for the time being.”