Japan has recognized the strategic value of friendshoring since well before it became a buzz phrase—and a burgeoning Japan-Australia green hydrogen partnership could offer lessons to other countries. Meanwhile, the US shale boom looks to be flagging, a new report raises aluminum alarms, and Europe’s China stance is hardening. Plus: Are we back to supply chain normalcy yet?
Japan is marshalling the forces of private companies, government coordination, and the state’s financial firepower to build an ocean-spanning hydrogen supply chain.
The Japanese government this week committed 220 billion yen (1.6 billion USD) of funding to a Japan-Australia joint venture producing carbon-free green hydrogen from brown coal. The Hydrogen Energy Supply Chain project will gasify coal from Australia’s Latrobe Valley, refine that gas into hydrogen, liquefy it at a nearby port, then ship it to Japan.
The complex effort draws on resources and technical know-how from major Japanese companies. The electric utility J-Power and industrial conglomerate Sumitomo Corp. will take charge of producing green hydrogen with carbon capture, utilization and storage. Then, Japan Suiso Energy, a joint venture between Kawasaki Heavy Industries and Iwatani Corp., will oversee purchasing, liquefying, and shipping the hydrogen. The ship, custom-built by Kawasaki and completed in 2020 with joint funding from Japan and Australia, is the world’s first liquefied hydrogen carrier.
And now, with the latest injection of Japanese government financing—drawn from the state’s 2 trillion yen Green Innovation Fund— the Australia-Japan hydrogen supply chain project has entered the commercial demonstration phase. Full production for export is set for the late 2020s, with the potential to supply up to 225,000 tons of green hydrogen a year.
This isn’t the first time Japan has sought to shore up its resource security through a major public-private undertaking in partnership with Australia. Recall the Japanese state-backed company Jogmec’s rescue of Australian rare earths miner Lynas from bankruptcy in 2016, keeping alive the only significant non-Chinese source of rare earths. And that effort is continuing: This week, Jogmec and Sojitz invested another 134 million USD in Lynas to secure the supply of heavy rare earths.
A similar playbook is again being put to the test as Tokyo seeks to leverage its alliance with resource-rich Australia to mitigate its energy scarcity. Much hinges on the hydrogen project, not least Japan’s energy security. And if successful, it could be an exemplar of strategic and coordinated friendshoring.