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Rare earth coercion: a coup for Australia?

As part of the escalating US-China trade war, China has threatened to withhold access to its supply of processed rare earth minerals. Rare earth minerals have become essential to the manufacture of high-technology products including everything from smartphones and vacuums to wind turbines and fighter jets. Considering their importance across the electronics, renewable energy and defence sectors, rare earth minerals have also become the ideal instruments for economic coercion.

With looming disruptions to the rare earth value chain, developed economies across the West are now rushing to secure alternative reliable sources of rare earth minerals. While China contains 40 per cent of the world’s rare earth reserves and controls 90 per cent of the market (including mining and processing), Australia could become an alternative provider of rare earth minerals.

Distancing themselves from the expensive and highly-polluting process of refining and processing rare-earth minerals, developed nations have hitherto been content with sending them offshore. But doubts over the reliability of China’s rare earth supply chain now have buyers and manufacturers nervous, and Australian miners are hoping to capitalise on the increased value of their product.

Indeed, Australia has the potential to be a driving force in the global rare earth supply diversification. Australia is currently the second-largest oxide producer, accounting for 15 per cent of global output. Lynas Corporation, the world’s most prominent rare earth minerals mining company outside China, is also based in Western Australia.

In June 2019, Australian mining company Miner Northern Minerals announced that it would be piloting facilities at their Browns Range mine in Western Australia, where it plans to separate dysprosium (one such rare-earth mineral) from other ores. The development of a local rare-earth mining sector could then catalyse the growth of high-tech manufacturing in Australia, allowing for the production of consumer goods, energy infrastructure and defence materiel to occur locally.

However, invulnerability to rare earth coercion is no easy feat. Not only is the mining and refinement of rare earth minerals immensely complicated, but the prerequisite infrastructure to mine and separate rare earth minerals takes years to design, build and install. Additionally, creating reliable industrial chains outside China with the scalability to absorb global demand will be a medium-term effort, exposing global markets to coercion in the interim. Emerging competition from global rare earth providers and a challenge to its monopoly may also prompt China to adopt coercive policies sooner, thereby curtailing the development of a local rare earth industry.

Even if Australia was able to extract and process its rare earth deposits, it desperately lacks the infrastructure to process them for further uses. Currently, the majority of extracted rare earth minerals are shipped to China for further processing before it can be used in final products - with little alternative for processing elsewhere.

Any effort to diversify the rare earth value chain must be holistic in its approach and application. While the need for new and diverse suppliers is clear, without an integrated value chain that combines extraction, processing and use in final products, Australia is not yet a viable alternative to China.

Heath Sloane is the China Fellow for Young Australians in International Affairs. 


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