Last week, the Chinese government announced an expansion of export restrictions on rare earth metals, aiming to leverage Beijing’s global monopoly on this critical mineral as a bargaining chip in trade negotiations with the United States, much to the Trump administration’s dismay. As the U.S. actively seeks alternative supply chains, Australia seizes the opportunity to assert its capability to become a key component in the U.S.’ efforts to reduce dependence on Chinese rare earths.
Rare earth metals are crucial materials used in the manufacturing of electronics, guided missile systems, advanced military aircraft, medical equipment, and high-tech industries. China controls 70% of global rare earth mining and 90% of rare earth processing. In recent years, rare earths have become an important secret weapon in Beijing’s diplomatic arsenal.
Australia boasts rich reserves of key minerals, including rare earths, and some of the most advanced exploration technologies in the world.
Amid the reignition of the rare earth issue in the midst of the U.S.-China trade war, Australia is striving to capitalize on the opportunity to provide an alternative supply chain to Chinese rare earths. Australian Treasurer Jim Chalmers met with White House National Economic Council Director Kevin Hassett in Washington on Thursday (October 16), emphasizing Australia’s advantageous position to meet global rare earth demand.
“We will work with partners to ensure we become a very reliable supplier to meet the critical minerals needs of the United States and other global markets,” Chalmers stated.
Australia possesses the world’s fourth-largest rare earth reserves and has a long history of rare earth extraction, making it a more viable alternative to China’s rare earth supply. It is also the headquarters of the only rare earth producer outside of China.
Lynas Rare Earths Ltd., based in Perth, Australia, has commenced refining heavy rare earths at their Malaysian plant.
On September 24, Australian Trade Minister Don Farrell met with U.S. Trade Representative Jamieson Greer in Malaysia. According to the Australian Broadcasting Corporation (ABC), during the meeting, Farrell asked Greer, “How can we help make America great again?”
Greer replied, “Give us your key minerals.” He acknowledged the U.S. government’s current high regard for this issue.
Shortly after, the White House confirmed that President Trump would meet with Australian Prime Minister Albanese on October 20 in the Oval Office. It is expected that the trade of critical minerals will be a significant topic of discussion during their meeting.
Hayley Channer, Director of the United States Studies Centre (USSC), described the upcoming meeting between Trump and Albanese next week as “crucial.” She told ABC News that the U.S. has long been concerned about “Australian minerals always going through China,” such as “90% of Australia’s lithium being sent to China for processing.”
However, Australia seems determined to change this situation. Prior to the parliamentary elections in May this year, Albanese announced a $1.2 billion critical minerals reserve plan to aid the development of Australia’s mineral industry, focusing on processing technology.
Specific details are still being finalized, but Australia envisions allowing selected partner countries and investors to access Australia’s critical minerals. The Australian Prime Minister recently candidly told “Insiders” that the purpose of the critical minerals reserve is to “prevent manipulation, especially by state-owned enterprises.” He specifically cited China and its manipulation of nickel prices as an example.
ABC reported that Australia is not looking to gift anything, but it is offering the U.S. something it cannot obtain from China – a secure and reliable rare earth supply without added geopolitical risks.
According to The Guardian, Professor Susan Park, who focuses on global energy transition research at the University of Sydney, stated that over half of the 50 resources on the U.S. critical minerals list depend on Chinese supply, including metals used in aircraft, submarines, and drones.
“The U.S. hopes to maintain military superiority, so it realizes it must acquire rare earth elements from places it considers free of geostrategic competition,” she said.
As a close ally with abundant resources, Australia is undoubtedly an obvious partner for cooperation.
Ahead of Australian Prime Minister Albanese’s visit to the U.S., Australian Treasurer Chalmers said, “We know U.S. companies urgently need critical minerals, and Australia is fully capable of meeting this demand.”
In fact, some deals have already been struck. On October 8, U.S. company Noveon Magnetics partnered with Australia’s largest rare earth company Lynas to supply magnets to U.S. defense firms. This news propelled Lynas’s stock to a fourteen-year high.
Last week, in addition to expanding the types of rare earth metals subject to export restrictions to 12, the Chinese government also stipulated that if the value ratio of Chinese rare earth materials in a product reaches 0.1% or more, foreign suppliers must obtain approval from the Chinese government to export these goods. Furthermore, products manufactured using certain technologies related to Chinese rare earths are also subject to export controls. Both new restrictions apply to products produced overseas.
President Trump responded by saying that such a situation had never been seen before and essentially, this will “block up” the global market. As the President of the United States, he stated that he would be compelled to counteract China’s actions economically.
Europe, Japan, and South Korea have already begun investing in Australia’s critical minerals, aiming to diversify supply chains away from China.
U.S. Treasury Secretary Benson stated on Wednesday (October 15) that if China chooses to become an unreliable global partner, then the world must “decouple” from it.
In fact, the Trump administration has been seeking to establish more sources of critical minerals to shield the U.S. from the threat of weaponizing critical minerals by China. In April this year, the U.S. reached a minerals agreement with Ukraine, allowing American companies priority access to rare earths and energy resources in exchange for U.S. investments in post-Russo-Ukrainian war Ukraine.
Negotiations currently underway between the U.S. and the Democratic Republic of Congo focus on the extraction of cobalt and lithium, with the U.S. providing security guarantees in exchange for mineral rights.
In September this year, the U.S. signed a $500 million memorandum of understanding with Pakistan. As per the memo, the U.S. committed to building a multi-metal processing plant and developing rare earth deposits. By the end of September, Pakistan shipped the first batch of critical rare earth minerals, including copper, antimony, and neodymium, to the U.S. Strategic Metals Company (USSM).