For instance, in a bold geopolitical move back in April, China said it would require export licenses for rare earths and critical minerals. This decision became a de facto embargo on these essential hard assets. This move is an extraordinary and ominous escalation by specifically targeting the United States. China has specifically declared a policy of denial on export licenses for military end use. The announcement elicited a predictable strategic panicked response from the U.S. and its allies. Australia, for one, is already ramping up efforts to boost its production and refining capacity for rare earths.
In fact, the U.S. government is currently backing the opening of a half dozen domestic rare earth mines and refineries. This legislative package would take steps to lessen the country’s dependence on Chinese materials. China currently does around 90% of the world’s rare earth refining. This compounds the challenge. As a result, there’s a significant push to try to build up an independent supply chain. The crisis opened up new lines of communication between the Trump administration and Australian officials. Just last week, Donald Trump sat down with Australian Prime Minister Anthony Albanese to discuss those discussions in detail.
Australia Takes Action
Australia is positioning itself as a key player in the rare earths market, with two major refineries in the pipeline: Iluka Resources and Arafura Rare Earths. Iluka has started constructing a refinery at Eneabba in Western Australia. This facility will process rare earths from its mineral sands tailings stockpile. Arafura Rare Earths is preparing to make a final investment decision for a new refinery, 140 kilometers (87 miles) north of Alice Springs. One thing is clear, their own projections show that construction will take three years and it will take another five years to reach full production capacity.
These initiatives all fit within a larger strategy to increase economic diversification and create green jobs in Australia. And Australian Prime Minister Albanese underscored the importance of this effort. As he put it, “It means manufacturing jobs in Australia, it means economic growth, it means greater economic resilience.” The partnership between the U.S. and Australia highlights a growing recognition of the need to secure alternative supplies of rare earth elements.
U.S. Efforts to Build Capacity
Prompted by China’s embargo, the U.S. has sped up efforts to restore its domestic mining and refining capacity. Mountain Pass, the well-known Californian REE mine is resuming operations! It used to provide 70% of the global rare earth supply and it today provides a price hedge. The Serra Verde mine in Brazil has reopened too.
Darryl Cuzzubbo, an industry expert, remarked on China’s strategic move: “China set themselves up to pull this card, but you can only pull it once.” He described how China’s mercantile practices have led to an aggressive response from other manufacturing juggernauts. Now, they’re really pushing hard for solutions to the rare earth supply issue. The second you release it, you create the opposite of a spark. This move inspires other global manufacturing juggernauts to work to address the issue at its roots,” Cuzzubbo said.
Cuzzubbo underscored Australia’s important position in the value chain. He explained that turning rare earth metals into their oxide form makes up 95% of that estimated value. As demonstrated in Supply Chain Resilience, Australia is the keystone in the global supply chain. With demand skyrocketing, countries around the world are seeking alternatives to offset Chinese dominance.
International Collaborations and Future Outlook
Donald Trump and Anthony Albanese sign the 2020 Australia-United States Space Trade Cooperation Agreement. This new agreement dramatically illustrates this rarity of commitment to ensuring both countries secure alternative sources of rare earths. Trump’s answer was unequivocal: “I’m committed to making America’s partnership with each of these countries stronger than ever before. This newly announced partnership is sure to increase collaboration on sustainable mining and processing projects. Beyond that, it will allow both countries to better respond to the economic coercion from China’s export restrictions.
Experts warn that creating an independent supply of rare earths is not something that can be done overnight. Cuzzubbo commented on the long-term implications of China’s embargo: “I just don’t see it as likely” that countries could quickly solve their supply issues without significant investment and time.
