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Shin-Etsu Chemical Co., one of Japan’s leading producers of rare earth magnets, is planning to construct a new rare earth refining facility in Japan as part of its strategy to strengthen supply chain resilience and reduce dependence on China.

The new refinery, which will be the company’s third facility in Fukui Prefecture in western Japan, is intended to enhance Shin-Etsu’s ability to maintain a stable supply of rare-earth products and permanent magnets. While the company has not disclosed the project’s capacity, schedule, or investment value, reports from the Nikkei indicate that the development will require an investment exceeding ¥35 billion (approximately US$218 million), with nearly half of the funding expected to come from government subsidies.

Rare earths have become increasingly important from both economic and geopolitical perspectives, as major economies seek to diversify supply sources and reduce China’s dominance in rare earth mining and processing. The issue is expected to feature prominently at the upcoming G7 summit in France.

Japan has also faced supply challenges following China’s suspension of exports of certain critical materials since early 2026, amid ongoing diplomatic tensions linked to comments made by Japanese Prime Minister Sanae Takaichi regarding Taiwan.

According to analysts at Citigroup, the Shin-Etsu project is considered strategically important from a national security standpoint. Shin-Etsu is one of Japan’s three major magnet manufacturers, alongside TDK Corp. and Proterial Ltd. In addition to its two existing facilities in Fukui, the company also operates a rare earth business in Vietnam.

Source: Bloomberg