“Some 3300 items of US military equipment depend on rare earths, which have few known or potential substitutes,” Beazley and co-author Ben Halton say. “They include almost every weapon being used by combatants in Ukraine as well as every fighter jet, navy vessel and nuclear weapon on earth.
“Nor is the commercial production of green energy and electric vehicles possible without them. Rare earths matter immensely.”***
Why speculative investors dominate in rare earths debate
Australia is in the race to develop alternative supplies to China’s dominance of the supply and processing of rare earths that are critical to the global economy and to national security. But the West is far behind. How quickly can this be done?
Jennifer Hewett - Updated Aug 16, 2023
Rare earths aren’t actually that rare. Nor are the 17 rare earth elements in the periodic table worth much in isolation, with some of purely nominal value. Current estimates of the global market value for rare earths are somewhere between $US8 billion to $US10 billion ($12.4 billion to $15.5 billion).
Yet some of these rare earths are necessary for the production of everything from cell phones to advanced robots, electric vehicles to wind turbines, to a myriad of defence applications.
That’s why rare earths, though small in volume, are a key subset of the various critical minerals only belatedly being acknowledged as vital for both economic and national security reasons.
The problem is that China has spent the last few decades making itself the dominant global supplier of rare earths and the near monopoly supplier of the magnets and metals produced by processing rare earths.
Until recently, Western countries, including Australia, were content to let China master and then maintain control over the complex technology and advanced chemical operations and skills required for downstream processing of most critical minerals, including rare earths.
Now the global panic is on as Western governments finally realise how their own lack of policy and companies’ commercial priorities have left them vulnerable to China’s ability to wreak havoc by cutting off supply at will.
Increasingly, national security concerns are interwoven with economics in terms of processing capacity.
Former defence minister Kim Beazley is co-author of a recent paper pointing out China’s carefully guarded capacity in processing extends to the manufacturing of rare earth permanent magnets that enable technologies such as leading-edge missile guidance, satellites and aircraft.
No substitutes
“Some 3300 items of US military equipment depend on rare earths, which have few known or potential substitutes,” Beazley and co-author Ben Halton say. “They include almost every weapon being used by combatants in Ukraine as well as every fighter jet, navy vessel and nuclear weapon on earth.
“Nor is the commercial production of green energy and electric vehicles possible without them. Rare earths matter immensely.”
But even mining for rare earths has so far not been particularly attractive commercially, particularly given China’s ability to subsidise and increase and decrease production (now from Myanmar as well) to deter competition by manipulating market prices.
The only mine in the US has just reopened in California, but this still exports product to China for processing while it tries to develop its own capacity.
The result is there’s currently only one major rare earths producer that operates independently of China’s supply chain – Australia’s Lynas Rare Earths. Lynas is about to start production at a facility in Kalgoorlie to process rare earths concentrate from its Mount Weld mine. Having previously relied on Malaysia for further processing, it’s no coincidence Lynas now has a contract with the US Defence Department to establish a rare earths separation facility in Texas.
History only reinforces Australia’s significance in the desperate search for reliable new supply of rare earths and processing capabilities.
Yet even Lynas’ survival was only guaranteed by hundreds of millions of dollars from the Japanese government after China temporarily banned the supply of crucial rare earth elements to Japan over a territorial dispute in 2010.
This history only reinforces Australia’s potential significance in the desperate search for reliable new supply of rare earths as well as processing capabilities. Australia’s high environmental standards make it a valuable partner for other developed economies like the US. But how quickly or effectively can this happen? At what scale?
The new US Australia Climate, Critical Minerals and Clean Energy Transformation Compact, for example, will inevitably involve the exchange of technology and investment in rare earths.
The Australian government prefers to publicly emphasise the importance of rare earths for renewables and electric vehicles, but defence applications will certainly form part of the private discussions when Resources Minister Madeleine King heads to the US this year.
‘It’s not going to be pretty’
Yet the extent of this interdependence – and just what rare earths mining and processing involves – is little understood outside the resources sector.
King told a conference in Perth this week Australia is very good at extraction but needs greater US engagement and investment to develop more processing facilities here.
“That’s really what the critical minerals story is about,” she said. “It’s not going to be pretty. There are going to be more refineries and there are going to be more processing plants.”
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