Australia's rare earth potential  

The Business Spectator has a look at a new rare earth producer in Australia - Australia's rare earth potential.

About 97 per cent of the world’s rare earth capacity is in China, including the essential refineries which western countries have tended to shun because of environmental objections.

China’s internal usage of rare earths has been rising and it now uses about two thirds of its capacity internally and it plans to cut exports. This will lock in vast numbers of manufacturing industries to China.

When the Japanese arrested the Chinese fishing boat captain, the Chinese cut off exports of rare earths to Japan. The captain was quickly returned but there is still the issue of apology.

As things now stand, China controls the growth of its competitors in so many industries.

Presumably 'sustainable' means that China does not want to run down its reserves too fast and that the price will be increased to fulfil the predictions of Deng Xiaoping.

When someone uses the word 'sustainable' they are often making a political statement to suit their own ends. So in the rare earths context, if you want rare earths you must be nice to China. The Japanese fishing affair showed the power of this weapon.

Europe and the US are pressing China to revalue its currency and the US has some nasty measures before the House of Representatives. As I explained yesterday (China's currency powder-keg, October 7), revaluing the Chinese currency presents problems for China which at this stage it does not want to tackle. If the US wants to press the currency issue, they only have to see what China did to Japan to work out China’s reaction – there will be a declaration that exporting rare earths to the US is 'not sustainable'. It may bring the US to heel just as it did to Japan.

But dominance may not last forever. That’s where Australia comes in.

There are a number of major rare earth deposits outside China, including one in WA owned by Lynas. Stephen Bartholomeusz told the remarkable Lynas story (Lynas' Chinese gift, September 23). But for intervention by the Foreign Investment Review Board, Lynas would now be controlled by China.

Instead, the Lynas Mount Weld concentrate will be processed at Lynas’ facility in Malaysia, the first to be built outside China for decades. Australia will be a player in this market.

But that’s some years off. Meanwhile, the word 'sustainable' is not innocuous when it comes to rare earths.