The challenge of reducing China’s control over critical minerals may be underestimated globally. Australian mining stocks saw a notable increase this week after a significant agreement between Prime Minister Anthony Albanese and US President Donald Trump. The leaders expressed confidence in boosting the supply of critical minerals and rare earths within a year. Despite these positive developments, Beijing’s tightening grip on technology and skilled workforce poses a threat to the progress.
The recent pact involves a commitment of approximately $4 billion from both countries for mining and processing, aiming to diminish the world’s dependence on China. China currently dominates the market for refined rare earths and rare earth magnets, crucial components in various industries like electric vehicles, electronics, and defense systems. Although the market is relatively small, with a projected 2024 production value of $6.5 billion, any disruption in these sectors could potentially lead to significant global economic losses.
While it is commonly stated that rare earths are not scarce, the reality is more nuanced. Among the 17 types of rare earths, less than half are considered “light” and are relatively more abundant and easier to extract. These are typically used in magnets, glass polishing, and some batteries. In contrast, the more valuable medium and heavy rare earths, essential for high-performance magnets and military applications, are predominantly found in China and Myanmar, requiring complex extraction and processing.
Even before the recent agreement, Australia had emerged as a key player in producing certain heavier rare earths like dysprosium and terbium. Lynas Rare Earths, with a $12 billion investment, became the first non-Chinese commercial producer of separated rare earths earlier this year. Other potential reserves exist in locations such as Madagascar, Greenland, and Vietnam, but developing these sites could take up to a decade, according to analysts.
One significant challenge lies in the downstream processing stage, where the extracted ore is refined into individual rare earth elements. Establishing and scaling up processing facilities could take around five years, with Chinese companies currently controlling a substantial portion of the global heavy rare earth processing capacity.
China’s recent export control measures further highlight the need to diversify the supply chain. The new regulations, effective from December, grant Chinese authorities enhanced oversight over critical minerals, including various rare earths and related technologies. This move gives China significant leverage in trade negotiations and complicates efforts to circumvent restrictions through stockpiling or alternative supply routes.
To address these challenges, public-private partnerships and international collaborations are becoming more crucial. The US Department of Defense has initiated partnerships with companies like American MP Materials and Lynas to overcome financial barriers in establishing processing capabilities. Long-term off-take agreements are key to ensuring stable operations amid market volatility.
However, overcoming China’s technological and expertise advantage will require sustained efforts. China’s dominance in rare earths stems from years of strategic planning and investment in specialized skills and industrial knowledge. Western companies will also need to address environmental concerns associated with rare earth mining and processing.
Furthermore, the global mining industry is facing a shortage of skilled workers, with a significant portion of the workforce nearing retirement age. Attracting talent from overseas will be essential to fill the gap, considering the limited number of experts in rare earth separation and refining outside of China.
In conclusion, reducing reliance on China’s rare earths dominance will require long-term strategies and international cooperation to mitigate supply chain risks and build expertise in critical mineral production.