Critical Synergies

Australia and Japan are two vital partners in a global context of fast moving developments in technology, energy and security. The nexus is critical minerals, rare earths, data centres and AI. Vulnerabilities in supply chains due to current dominance by a few countries have resulted in major policy announcements, bilateral and plurilateral agreements and investments in mining and processing,

The intense trade, investment, financial and security relations between Australia and Japan, underpinned by genuine trust, are enhanced by their mutual cooperation with close partners such as the US, India and South Korea. All of these countries are also major trading and investment partners with Australia. This group will be able to play a major role in establishing essential critical minerals supply chains and enhancing resilience against market disruptions.

Just two months ago, the US, Australia and Japan entered into a trilateral agreement to support a joint venture into the processing of gallium in Western Australia. The JV is between Alcoa and Japan Australia Gallium Associates (Sojitz and JOGMEC).

At the same time, the US and Australia signed the Critical Minerals Framework and the US and Japan signed a bilateral Framework for critical minerals and rare earths. Australia and Japan already signed a Critical Minerals Agreement in 2022, so these new agreements will build on existing commitments for major new investments.

Critical minerals are essential to national security and to the success of future economic welfare which will be heavily influenced by AI. For example: lithium, cobalt and nickel for EVs and batteries; palladium for fuel cells; gallium and germanium for semiconductors and fibre optics; titanium, tungsten and niobium for aircraft and defence equipment. Australia is a global leader in having major resources of the majority of critical minerals and will benefit from the investment and customer demand from the manufacturing countries such as the US, Japan and South Korea.

However important demand for EVs and batteries will be, it is AI that will be the centre of new economic developments. AI and data centres are also dependent on critical minerals and rare earths. AI relies on advanced semiconductors, chips and GPUs. Critical minerals and rare earths are crucial for the performance, efficiency and thermal management of the components. Data centres house the servers, storage and networking equipment for AI and also rely on critical minerals and rare earths for structural, electrical and cooling systems. Data centres are extremely energy intensive and require uninterruptible power.

There are many Japanese companies with intense interest in data centres in Australia and AI is widely understood to be the next transformational technology and the centre of competition between major powers. Australia and Japan are on track to be major, reliable contributors to this exciting future.

Author: Manuel Panagiotopoulos

Managing Director, Australian and Japanese Economic Intelligence