The Rare Earths Race: China's Dominance and the World's Quest for Supply Security

China continues to assert its dominance in the global rare earth market through strategic acquisitions and export controls. This has spurred international efforts, particularly from Australia and the US, to diversify supply chains and reduce reliance on Beijing, highlighting the critical geopolitical importance of these essential minerals for modern industries.

China's Expanding Influence and Export Controls

Beijing has intensified its control over the rare earth supply chain, a move with significant geopolitical implications. Reports indicate that China's commerce ministry has cautioned South Korean companies against exporting products containing Chinese rare earth minerals to U.S. defense firms, threatening sanctions for non-compliance. This follows earlier export restrictions on key rare earth elements. Furthermore, China is strengthening its approval process for rare earth export applications, signaling a more stringent approach to managing its critical mineral resources.

In a notable acquisition, China's Shenghe Resources announced plans to acquire Australia's Peak Rare Earths for approximately $97 million. Peak Rare Earths is developing the Ngualla project in Tanzania, which boasts one of the world's largest and highest-grade neodymium-praseodymium (NdPr) deposits. Despite a halt in rare earth raw concentrate shipments from its U.S. partner, MP Materials, due to tariffs, Shenghe Resources stated that its diversified supply chain, including domestic and international sources, would mitigate any significant impact on production.

Global Efforts Towards Supply Chain Diversification

In response to China's tightening grip, other nations are accelerating efforts to establish independent rare earth supply chains. Australia has committed an additional A$400 million ($257.20 million) loan to Iluka Resources for its Eneabba rare earths refinery in Western Australia. This brings the total government loan to A$1.65 billion, despite a significant cost increase for the project, underscoring Australia's commitment to becoming a key non-Chinese rare earth processor.

Meanwhile, companies like Australia's Lynas Rare Earths, the largest producer outside China, are navigating challenging market conditions. While Lynas reported a nearly 4% rise in second-quarter revenue, its profit plunged due to high costs and weak prices. The company is actively exploring acquisitions in Malaysia and Brazil to expand its rare earth footprint. In another move to reduce reliance on China, Neo Performance Materials has exited its rare earth separation facilities in the country.

Key Takeaways

• China is leveraging its rare earth dominance through export restrictions and strategic acquisitions, aiming to control the global supply for critical industries.
• The acquisition of Peak Rare Earths by Shenghe Resources highlights China's strategy to secure high-grade deposits globally.
• Nations like Australia are investing heavily in domestic processing capabilities to diversify supply chains and reduce dependence on China.
• Non-Chinese rare earth producers face market volatility and high costs but are pursuing expansion and diversification strategies.
• The geopolitical landscape of rare earths is intensifying, with nations prioritizing secure and independent access to these vital materials.

Sources

• Lynas Rare Earths’ second-quarter revenue rises nearly 4%, KITCO.
• China’s Shenghe Resources to buy Australia’s Peak Rare Earths for $97M, KITCO.
• China asks Korea not to export products using rare earths to US defense firms – reports, KITCO.
• Chinese rare earth processor Shenghe sees little impact from halt to US feedstock imports, KITCO.
• Australia grants further $257m for Iluka’s rare earths refinery amid cost blowout, KITCO.