When China imposed fresh curbs on rare earth exports last week, ratcheting up trade tensions with the United States, stocks in some Australian mining firms jumped — signalling a shifting trend in the global scramble to lock up key minerals. Firms such as Lynas Rare Earths, Northern Minerals, and Arafura Rare Earths saw double-digit gains as investors wagered on their chances of becoming long-term suppliers to Western energy and defence industries, the Financial Times reported.
Australia's strategic advantage picks up momentum
For over a decade, Australia has been trying to establish itself as a trustworthy supplier of strategic minerals, such as the rare earth elements used in electric vehicles, renewable energy, and military technologies. Up to now, China's dominance — producing about 60% of the world's rare earths and 90% of its processing — has been too hard for other countries to challenge. But China's recent export controls might have unwittingly enhanced Australia's strategic position.
Lynas Rare Earths, which produces light rare earths in Western Australia and processes them in Malaysia, stated that it is "best placed" to meet the demand gap. Financed by Japanese investors and cooperating closely with the U.S. Department of Defense on a new Texas processing facility, Lynas is diversifying into heavy rare earths production. Starting from mid-2025, its Malaysian plant will start making dysprosium and terbium (DyTb), key to high-temperature magnets that power electric car motors and military systems.
Iluka Resources is also in the process of venturing into the refining arena, with the intention of beginning operations at its Eneabba plant in Western Australia in 2027. The company received A$1.6 billion (US$960 million) in financing from the Australian government to assist in the development of what it terms a "secure source" of rare earths for overseas customers.
Export controls as geopolitical leverage
China's move to limit the export of seven rare earths and permanent magnets seems aimed at defence and high-end manufacturing industries beyond its shores. Analysts interpret the message as clear: if global firms, especially U.S. defence contractors, need access to high-end rare earth products, they might need to relocate production within China.
"China doesn't want its rare earths back in missile form," Ord Minnett stockbroker wrote in a client note, highlighting the geopolitical undertones of the export controls. The action has highlighted how much the world's supply chains rely on one source — a weakness that has created fresh urgency to diversify.
Market volatility persists amid strategic value
Even with strategic victories, prices of rare earths continue to be volatile, impacting company bottom lines. Lynas reported an 85% decline in net profit for the half-year ended December 31, while its NdPr (light rare earth) production increased 22% to a record 2,969 tonnes. Analysts like Barrenjoey's Daniel Morgan contend that the company's market value does not yet account for its long-term strategic significance.
Efforts to build Australia's strength are picking up political momentum. Canberra has responded to the Trump administration's recent imposition of a 10% tariff on Australian imports by announcing plans to create a national critical minerals reserve. Such a reserve could underpin pricing, offer bargaining leverage in trade negotiations, and stabilize demand in an opaque and highly concentrated market.
A long road ahead for supply chain independence
Although Australia is home to some of the most fertile deposits of high-grade rare earths in the world after China, creating infrastructure for refining and manufacturing takes time. The UK-based director of the Critical Minerals Intelligence Centre Gavin Mudd reiterated that what's required to build full-spectrum supply chains including refining, making magnets, and recycling is further government help.
“If we are to develop diversified, resilient and responsible rare earth supply chains, world governments must ensure that we construct not just mines but refineries, factories and recycling facilities," Mudd said.
As geopolitical fault lines run deeper and China clamps down on strategic exports, Australia's rare earth industry seems set for a bigger role — if it can ramp up fast enough to satisfy growing global demand.
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