Vietnam is positioning itself to play a key role in expanding the global rare earth supply chain away from China as demand for a range of applications increases and geopolitical concerns drive calls for a broader supply base.
According to US Geological Survey (USGS) data, Vietnam is estimated to have the world’s second largest exploitable rare earth resource, after China, with 22 million tons of reserves compared to China’s 44 million tons. North Korea is believed to have the largest deposits in the world, but sanctions prevent the raw material from being developed for the global supply chain.
Despite years of research, Vietnam has so far failed to realize its potential. The country has mined just 400 tons of rare earths in 2021, up from 700 tons in 2020, the USGS data shows, paled in comparison to China’s rise to 168,000 tons in 2021 from 140,000 tons in 2020.
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Japan turned to Vietnam as a source of rare earths in 2010 after a political dispute prompted China to limit its exports to the country. Japanese trade statistics show that Vietnam is the second largest exporter of rare earth metals to Japan after China, but much of it would still be Chinese material.
Japan is the world’s second-largest producer of permanent magnet rare earths after China, and Japanese companies have invested in projects in Vietnam over the past decade in an effort to secure non-Chinese material. The boost to Vietnam’s supply development ended with the normalization of trade between China and Japan, but there is now renewed interest now that the Japanese government has adopted a national security strategy that encourages companies to diversify their critical mineral supply chains.
Rare earths are critical raw materials not only for electric vehicles and wind turbines – which are essential for the transition to clean energy – but also for electronics, medical applications and military equipment.
More recently, other countries have turned to Vietnam to secure supplies before it gets off the ground by investing in development projects.
The country’s economy is growing rapidly – estimated by Fitch Solutions at 7.8% in 2022 and 6.5% this year. And it is becoming an increasingly attractive regional base for companies responding to US-China trade tensions, post-Covid supply chain diversification and rising Chinese labor costs. Vietnam is becoming a major manufacturing base in Southeast Asia for electronic components and devices and is one of the fastest growing renewable energy markets. Several countries are establishing partnerships with the Vietnamese government and private companies to establish an integrated supply chain for rare earths and other critical materials.
In early December, Vietnam’s Commerce Minister signed an agreement with his South Korean counterpart to collaborate in the exploration and development of nuclear minerals, including rare earths, in Vietnam to ensure stable global supply chains. South Korea’s trade, industry and energy minister Lee Chang-yang had proposed in August to strengthen cooperation on rare earth supplies and sent a research team to explore ways to develop the sector.
Australian companies are also exploring investments in Vietnamese mining, including Australian Strategic Minerals (ASM), which signed a deal with Vietnam Rare Earth in mid-December for the long-term supply of rare earth oxides as a feedstock to ASM’s Korean Metals Plant before the De Dubbo mine starts working.
Canada has expanded its trade with Vietnam under the Trans-Pacific Partnership free trade agreement, and in December the Canadian province of Saskatchewan sent a delegation to Vietnam to discuss additional options. Saskatchewan’s minister of trade and exports pointed to the potential for the countries to collaborate on green energy, including sustainable mining and rare earths.
By Nicole Willing @ argument media
