China’s Rare Earth Threat Sparks An International Backlash
Tim Treadgold
Tim TreadgoldContributor
Asia
China fired a verbal rocket at U.S. arms maker Lockheed Martin last month only to unleash a response which threatens its most strategically important industry, rare earths.
Because rare-earth elements have essential uses in a range of civil and military technologies, such as weapons guidance systems, China’s control of supply is a powerful commercial and diplomatic bargaining chip.
A US-made Patriot missile is fired from
A US-made Patriot missile is fired from a mobile launcher on a beach during an exercise in eastern ... [+] AFP VIA GETTY IMAGES
Earlier threats to cut-off supplies of the elements, especially the two most important heavy rare earths, neodymium and praseodymium, have caused short-term disturbances in the market with China eventually backing off in case it pushed too hard and international customers developed their own supplies.
A decade ago a dispute with Japan led to a Chinese rare earth embargo, but it sparked a response in the form of Japanese financial backing for a new rare earth mine in Australia and an associated processing facility in Malaysia.
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This time around China is using threats of a rare earth embargo on Lockheed Martin following the U.S. company winning a contract to upgrade batteries of Patriot air defence missiles in Taiwan.
U.S. And Allies React
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Whether China intends to proceed with an embargo is unclear but the threat itself has sparked a reaction which involves the U.S. Government and several allies in pushing ahead with plans to develop non-Chinese supplies of rare earths.
There has also been a significant reaction by investors who have boosted the share prices of companies in production or planning to develop rare earth mines.
The most important development after the threat to Lockheed Martin was a deal between the U.S. Defense Department and an Australian rare earth miner to push ahead, with a private U.S. partner, in planning the construction of a rare earth separation facility in Texas.
Malaysia Approves A Permanent Waste Site
That was followed by this week by the Malaysian Government approving a proposed site for the permanent disposal of rare earth waste, an important step in ensuring the long term operation of a plant which processes ore mined by Lynas Corporation in Australia.
In effect, three countries have moved in near-unison to accelerate the development of a non-Chinese supply of rare earths in the days after Chinese targeted Lockheed Martin.
Tour of Lynas Corp.'s Rare Earths Processing Plant Site
Lynas Corporation's rare earth processing plant in Malaysia. Photographer: Goh Seng/Bloomberg. BLOOMBERG NEWS
Australian involvement is through mining one of the world’s richest deposits of rare earths at Mt Weld in Western Australia. Malaysia is the home of first stage processing of the mildly radioactive ore which is why a permanent waste disposal site is important, and the U.S. will be the site of a separation plant to convert a cocktail of rare earth elements into a usable form.
That final step, which sees Lynas team up with a U.S. partner, Blue Line Corporation, and the Department of Defense, is the critical step in a multi-layered process and the one which could be the key in breaking the Chinese stranglehold of advanced rare earth processing.
Currently, even the material mined by Lynas in Australia and processed in Malaysia goes to China for final separation.
Investors Warming To Rare Earths
Investors are starting to recognise that this latest dispute between China and the international community might be the key to breaking the decades-long dominance of a strategically important industry.
Lynas shares have risen 12% on the Australian stock market this week, taking their rise since a Covid-19 low in March to 130%.
Pensana Rare Earths, a new player in the business, has done much better after announcing high-grade exploration results from its Longonjo project in the West African country of Angola. Its shares are up 34% this week and 450% since their March low.
