RARE EARTH ELEMENTS (REEs)Australia and Its Partners Must Do more to Avoid Dependence on China for Rare Earths
Low labor costs, indifference to the environmental impacts of mineral processing, and the rest of the world dropping the ball while focusing on other issues allowed Beijing to achieve global dominance of critical-minerals markets, with almost 80% control of rare earths and up to 94% of other critical minerals like magnesium. The global markets for rare-earth elements and critical minerals are shaping to be the next economic hot zone for the Chinese Communist Party—and for the security of the world’s advanced economies.
The global markets for rare-earth elements and critical minerals are shaping to be the next economic hot zone for the Chinese Communist Party—and for Australia’s security.
Japan recognized the economic vulnerability created by China’s near monopolistic control of these markets more than a decade ago when the CCP restricted Japan’s access to rare earths during a dispute between two countries over the Senkaku Islands.
In contrast, awareness is only now gathering pace in Australia, the US, Canada and other like-minded nations. The challenge ahead for these countries is to work together to create secure supply and value chains by supporting investment, building infrastructure and helping the sector to identify and lock in customers.
Already, Beijing appears to have recognized that the tentative steps other countries are taking could unravel its coercive power in the sector. In a breathtaking moment of hypocrisy, Chinese Foreign Ministry spokesperson Zhao Lijian said last month: ‘No one should use the economy as a political tool or weapon, destabilize the global industrial and supply chains or punch the existing world economic system.’
Even before Xi Jinping came to power, Chinese companies recognized the strategic and economic importance of rare earths and critical minerals. Low labor costs, indifference to the environmental impacts of mineral processing, and the rest of the world dropping the ball while focusing on other issues allowed Beijing to achieve global dominance of these markets, with almost 80% control of rare earths and up to 94% of other critical minerals like magnesium. Beijing’s increased state control of Chinese companies has further armed it with a suite of coercive economic levers.
Japan has led the way in responding to this market control, including by investing in Australian rare-earth company Lynas, which should provide confidence in an alternative, resilient supply chain.
Better late than never, the rest of us are catching up. In February, Washington announced actions to bolster the supply chain for rare earths and other critical minerals to reduce dependence on China. This was followed by US government investments in onshore processing of heavy rare earths.
In June, Lynas signed a US$120 million contract with the US Department of Defense to build a commercial facility in Texas for separating heavy rare earths.
