The world’s supply of rare earth elements has become a casualty of the US’s trade war with China, leaving Australia to pick up the slack.
The 17 elements – used in a range of new and emerging technologies like electric car batteries and specialised computer chips – are rapidly becoming a key commodity in global trade.
Resources Minister Matthew Canavan said they provide “huge scope” for Australia to capitalise on that growing demand.
In November, Australia took a huge step towards making that a reality when Geoscience Australia and its American equivalent – the US Geological Survey (USGS) – struck a deal to develop resources and supply chains.
“The US has a need for critical minerals and Australia’s abundant supplies makes us a reliable and secure international supplier of a wide range of those, including rare earth elements,” Mr Canavan said.
What are rare earth elements?
‘Rare earth elements’ is a term applied to 17 metals used in the production of electronics.
Despite their name, these elements aren’t particularly uncommon, with one of the 17, Cesium, actually the 25th most abundant crustal element on the planet.
The name instead refers to the fact these elements are rarely found in large enough concentrations to support a commercial mine, making it difficult to produce them on an industrial scale.
What do they mean for Australia?
A report by Geoscience Australia, based on data compiled by USGS, estimates the market for rare earth elements is worth around $24.3 billion annually, and Australia can increase its share of that pie.
Mining Council of Australia chief executive Tania Constable said Australia has “significant rare earth element resources, which could sustain several key mines for decades”.
“One example of such a mine is Arafura Resources Nolans Project in the Northern Territory, which will attract $1 billion of investment into regional Australia and create hundreds of local jobs.”
The demand for rare earth elements also comes at a time when demand for Australian coal – a $67 billion-a-year cash cow that represents more than 15 per cent of Australian exports – is plummeting.
Miners BHP and Rio Tinto have called time on coal projects, and Glencore has placed a cap on production.
What’s the global market like?
The market for rare earth elements is controlled by China, which accounts for somewhere between 85 and 90 per cent of the supply chain, according to CommSec mining and energy commodities research director Vivek Dhar.
Australia and the US are the two next largest producers, but China’s “lax environmental regulations and cheaper costs” mean the nation’s grip on the rare element market is well and truly “entrenched”.
“It is worth noting that China’s control over supply has been directly responsible for the previous spikes in rare earth prices,” Mr Dhar said.
“In 2011, China ramped up restrictions on rare earth exports, which led to a significant market shortage and a spike in rare earth prices that peaked almost three times higher than today’s price.
“China’s 15 years of export restrictions finally came to an end at the beginning of 2015 after the World Trade Organisation ruled against the practice. Prices subsequently trended slightly lower.
“In 2017, rare earth prices rose 55 to 60 per cent higher than today’s level after China reduced domestic rare earth production and processing as authorities enforced environmental regulations more rigorously.”
Prices skyrocketed earlier this year too, rising between 20 and 25 per cent as the US’s on-again, off-again trade war left market participants worried China may clamp down on its exports.