By: Abigail Hunter, Zoe Oysul, and Jocelyn Trainer
Critical minerals emerged as a key area for collaboration during the U.S.-Japan-Philippines summit, at a time when the United States seeks to strengthen diplomatic, military, and economic relationships in the Indo-Pacific to counter Chinese aggression in the region and dominance over the critical minerals supply chain.
The complementary strengths of each country—the Philippine nickel reserves, Japanese processing capability and midstream industry, and American nickel demand for EV manufacturing and project financing—create a valuable opportunity for collaboration within the Partnership for Global Infrastructure and Investment (PGI) toward the shared goals of building resilient supply chains and promoting long-term economic development.
While the summit agenda highlighted cooperation on emerging technologies, clean energy, and regional security, these discussions are only the start of U.S.-Japan-Philippines coordination on critical minerals in the modern era.
Diplomatic, military, and economic relations in the Indo-Pacific are a sustained focus for U.S. administrations to counterbalance the growing economic and security threats posed by China. A change of leadership in the Philippines, increased demand for critical minerals and clean energy technology, and evolving trade and investment policy have opened new avenues for the United States’ cooperation with regional allies.
In this context, President Joe Biden welcomed Prime Minister Fumio Kishida and President Ferdinand Marcos Jr. to the White House for a historic U.S.-Japan-Philippines summit on trilateral cooperation, economic relations, and the Indo-Pacific, “to promote… emerging technologies, advance clean energy supply chains and climate cooperation, and further [regional] peace and security.” Many of the agenda items depend on the ability of the United States, Japan, and the Philippines to uphold the rules-based international order that China actively seeks to counter and secure a sustainable critical mineral supply chain.
Although the U.S.-Philippines relationship frayed during President Rodrigo Duterte’s six-year term due to his desire to strengthen ties with China and concern over his connections to corruption and human rights abuses, the election of President Marcos Jr. offers the United States an opportunity to reengage diplomatically and militarily with the Philippines.
The Biden administration enthusiastically embraced this opportunity, with President Biden offering the first congratulatory call to Manila following election results and sending a historic number of high-level delegations—including but not limited to Vice President Harris, Secretary of State Anthony Blinken, Secretary of Defense Lloyd Austin, Secretary of Homeland Security Alejandro Mayorkas, and Secretary of Commerce Gina Raimondo—to engage with their Filipino counterparts and advance diplomatic, defense, and economic collaboration.
The United States, Japan, and the Philippines share robust bilateral and trilateral relationships, driven by the need to enhance security cooperation as China becomes increasingly emboldened in the South China Sea and the wider region. However, regional maritime security is just the tip of the iceberg of the security and economic threats China poses. At the base of the iceberg lies China’s dominance of the critical minerals supply chain—particularly in processing. Recent events, such as Chinese graphite export restrictions and heavy investment in Indonesian nickel, have underscored the importance of expanding the triad’s defense alliance to include energy and economic security issues.
The increased outreach to the Philippines by the Biden administration has included some discussion on critical mineral supply chains and advanced energy technologies, but these efforts appear to be limited in scope compared to other bilateral engagements, including those with the EU and South Korea.
The modest minerals focus of past initiatives is surprising given the Biden administration’s ambitious energy transition goals, which include adoption of commuter and heavy transport electric vehicles, substantial investments in domestic clean energy manufacturing, and expressed interest in mitigating supply chain risks for these advanced technologies. With its nickel deposits and a desire to further develop this industry, the Philippines can play a crucial role in advancing the Administration’s policy priorities.
The critical mineral supply chain also offers a strategic avenue of cooperation for the triad to work toward shared energy, economic, and security goals through executive coordination to build up regional mineral extraction, processing, and production as well as align policy and financing tools. Together, the triad represents major nodes of the critical mineral supply chain, each member with their own complementary strengths.
The Philippines is the second largest nickel producer and became the largest nickel ore exporter globally after Indonesia’s export ban on raw nickel ore. However, Manila’s efforts to increase the country’s position in the value chain have not borne fruit and it is still primarily an extracting country, exporting the lion’s share of its ore to China, and the rest to Japan, where most nickel processers operate.
The United States has a large auto market and growing EV sales, which surpassed one million vehicles sold in 2023. As the largest consumer base for EVs and other clean energy technologies worldwide, the United States will require increasing amounts of nickel and other critical minerals to achieve its energy transition and to advance its energy manufacturing goals. Recognizing these needs, the U.S. government has ushered in a wave of supply chain policies and is leveraging joint investment coordination through the Partnership for Global Infrastructure and Investment (PGI) with existing tools like the Export-Import Bank, the U.S. International Development Finance Corporation, and the U.S. Trade and Development Agency.
For example, in 2022, the U.S. Trade and Development Agency (USTDA) awarded a grant to the Philippine mining company, Eramen Mineral Inc. (EMI), to “advance the development of an environmentally sustainable nickel processing facility in the Philippines.” Operators anticipate using nickel ore from EMI to produce refined cobalt and nickel products that are used for battery precursor materials. If successful, this project could serve as a blueprint for building out extraction and production capacity outside of China. However, EMI’s refinery is only one of many facilities that will be needed to build a resilient and sustainable nickel supply chain, and the U.S. lacks the industry players to achieve this alone.
Domestic policies also constrain U.S. ability to support nickel production in the Philippines. The Inflation Reduction Act’s (IRA) sourcing requirements for clean vehicle tax credits, which favor minerals from the United States or its free trade agreement (FTA) countries, send unfavorable market signals for critical mineral producers and strategic partners without such agreements, including the Philippines.
Japan, with its industry, technical expertise, and status as an IRA-compliant source, is the missing piece of the puzzle that can help bridge the gap between U.S. policies and the realities of the global nickel market. Once seen as an industrial challenger in the 1980s, Japan has now become a key partner for the United States in its strategic competition with China. U.S. policymakers have sought to expand this relationship in the military and economic domains, including by recently signing a critical minerals agreement (CMA) in 2023. The CMA solidifies Japan as a key U.S. partner in efforts to create a diverse and secure critical mineral supply chain.
Japanese companies have significant expertise in nickel processing and already have ties with the Philippines. While industry attention has been focused on the relatively recent Chinese success in the high-pressure acid leach (HPAL) process in Indonesia, Sumitomo Metal Mining (SMM) was the first company to successfully set up a commercial-scale HPAL facility in the Philippines back in 2005. The nickel produced by SMM feeds into the Japanese industry, to be further transformed and sold to companies like Panasonic and Toshiba with strong midstream presence in cathode production and battery manufacturing.
U.S. policymakers could alleviate some tradeoffs that are presented while simultaneously prioritizing derisking from China and climate change decarbonization goals by aligning trade policy, advancing commercial diplomacy, and harmonizing critical mineral supply chain policies. For instance, Japanese companies could explore further investment opportunities in the Philippines and increase trade with the Philippine nickel producers, with the goal of eventually supplying the U.S. market. The Philippine critical minerals could be further transformed into constituent materials needed for lithium-ion batteries in Japan—an FTA country—for the purposes of the IRA, thereby providing a pathway to qualify EVs with these components for IRA tax credits, increasing foreign direct investment in the Philippines, and reducing U.S. and Japanese reliance on the Chinese producers in Indonesia. The United States, Japan, and the Philippines should coordinate government policies and programs, including the Mineral Security Partnership, to support private sector efforts.
The recent U.S.-Japan-Philippines summit signifies a crucial step in fortifying regional stability amidst escalating challenges posed by China. While the summit agenda highlighted cooperation on emerging technologies, clean energy, and regional security, these discussions are only the start of U.S.-Japan-Philippines coordination on critical minerals in the modern era. The three heads of state issued a joint statement as the summit closed, pledging to “support critical minerals industries in all of our countries as a way to promote resilient and reliable global supply chains for critical minerals.” Additionally, the Philippines joined the Minerals Security Partnership Forum as a foundational member. As the triad deepens collaboration, the shared goals of advancing secure, sustainable supply of critical minerals will be the linchpin of future energy, economic, and regional security, with the PGI investment in the Luzon Economic Corridor serving as the backbone of these efforts.
Abigail Hunter is the Executive Director of SAFE’s Center for Critical Minerals Strategy. Zoe Oysul is a Senior Policy Analyst. Jocelyn Trainer is a Policy Analyst.
