Major Japanese trading companies are increasing investments in lithium mining projects overseas as the resource-limited country strives for a stable supply of a mineral that¡¯s critical for producing batteries for electric vehicles.

Japan¡¯s largest trading company, Mitsubishi Corp., said last month that it would set up a new joint venture with Canada¡¯s Frontier Lithium to develop a lithium mining project in the province of Ontario. The project is expected to run more than 20 years and produce roughly 20,000 tons of lithium carbonate ¡ª enough to produce batteries for about 300,000 electric vehicles ¡ª every year.

Mitsubishi will acquire a 7.5% stake in the joint venture for 25 million Canadian dollars (?2.8 billion) as part of its first-ever investment in a lithium mine. The funding will primarily be used to conduct the project¡¯s feasibility study and prepare for obtaining permits required for construction, the firm said in a statement on March 5.

Mitsui & Co., another major Japanese trading firm, announced on March 28 that it would purchase $30 million in common shares of Atlas Lithium, a company in Florida that holds rights to lithium mines in Brazil. An offtake agreement gives Mitsui the right to purchase 315,000 tons of lithium concentrate from Atlas Lithium¡¯s new project in Brazil.

A spokesperson for Mitsubishi said while the current market has an excessive supply of lithium, the firm believes demand will steadily grow in the mid- to long-term, as lithium is largely used in rechargeable batteries for electric vehicles, making it essential for the electrification of the transportation industry.

The price of lithium dropped last year to its lowest levels since 2020 due to an overabundance of supplies.

Shotaro Kumagai, an economist at the Japan Research Institute, said such investments could be seen as part of an effort to diversify Japan¡¯s supply chains.

¡°Currently, lithium production is heavily concentrated in specific countries like Australia, Chile, China, and Argentina. So, there¡¯s a need to create a situation where we can supply resources more steadily, even when something happens to those four countries,¡± he said.

Lithium is designated by the Japanese government as a critical mineral indispensable for the country¡¯s industries. The Economy, Trade and Industry Ministry said last year that it would subsidize up to 50% of the costs related to mine development and smelting of critical minerals, including lithium.

In December, Mitsubishi Minerals became the first ¡ª and currently the only firm ¡ª to receive the subsidy for its construction of a plant that would be used to develop technology to recycle lithium from used lithium-ion batteries.

The Mitsubishi Corp. spokesperson declined to comment on whether its new joint venture would qualify for the subsidy. Mitsui & Co. did not respond to a request for comment.