Vietnam is targeting to become a key player in the global supply chain for rare earth minerals, as the world tries to diversify supplies away from China. Demand for rare earths is growing for a range of applications and concerns mount over geopolitical concerns, which drive efforts for a wider supply base. Vietnam has the world’s second largest rare earths reserves with 22 million tons, behind China’s 44 million tons. Although North Korea is believed to have the world’s largest deposits, the country’s political situation and sanctions are preventing the resources to be explored and developed for the global supply chain.

Despite having the world’s second largest reserves, years of exploration has so far been unable to tap into Vietnam’s potential. The Southeast Asian nations has mined just 400 tons of rare earths in 2021, down from 700 tons in 2020. This is dwarfed by China’s 2021 production of 168,000 tons, up from 140,000 tons in 2020.

Japan had already turned to Vietnam for rare earths supplies back in 2010, when China blocked exports following a political dispute. Japanese trade statistics show Vietnam as the second-largest exporter of rare earth metals to Japan after China, but much of that would still be Chinese material.

Japan is the world’s second-largest producer of rare earths containing permanent magnets after China, and Japanese companies have been investing in projects in Vietnam over the past decade in a bid to secure non-Chinese material. The efforts have slowed down after trade with China has normalized, but there is now renewed interest as the Japanese government has adopted a national security strategy encouraging companies to diversify their critical mineral supply chains.

Rare earths are critical raw materials for a wide range of industries from EVs and wind turbines to electronics and military equipment.

More countries have started turning to Vietnam recently to secure supply by investing in development projects.

Vietnam’s economy is growing fast, with GDP growth expected to reach 7.8% in 2022 and 6.5% in 2023. It is also becoming a hotspot for companies that try to find new regional bases on the back of U.S.-China trade tensions, post-Covid supply chain disruptions and rising China labor costs. Vietnam has become an important production base in southeast Asia for electronic components and devices and is one of the fastest-growing renewable energy markets. Several countries are forming partnerships with the Vietnamese government and private companies with a view to establishing an integrated supply chain for rare earths and other critical materials.

In one of those deals in early December, Vietnam and South Korea signed an agreement to jointly explore and develop core minerals including rare earths in Vietnam to provide stable global supply chains. South Korea’s trade, industry and energy minister Lee proposed strengthening co-operation on rare earth supply in August and sent an investigation team to explore ways to develop the sector.

Another agreement came in mid-December between Australian Strategic Minerals (ASM) and Vietnam Rare Earth for the long-term supply of rare earths to provide feedstock for ASM’s Korean Metals Plant before its Dubbo mine in Australia starts operations.

Canada has increased 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 opportunities. Saskatchewan’s trade and export ministry noted the potential for the countries to collaborate on green energy, including sustainable mining and rare earth elements.