The global race is on for rare earths and Lynas  

The SMH has a look at Australia's entrant into the rare earths industry and the problems facing its Malaysian processing plant - The global race is on for rare earths and Lynas.

WHEN a Chinese trawler fishing in disputed waters collided with Japanese coastguard patrol boats early on September 7, the global supply of rare earths - crucial for producing smartphones, flatscreen televisions, hybrid cars and iPads - was plunged into turmoil, even if it was not immediately apparent.

And Australia's crucial role in the lucrative trade was also to be thrust firmly into the international spotlight.

The errant vessel's skipper was arrested and detained, calls for his release went unheeded, and a diplomatic row, seeded by a long-standing territorial feud, erupted between the two Asian nations. For two weeks, tensions worsened with no resolution in sight - until China decided to hit Japan where it hurt.

On September 22, Chinese Premier Wen Jiabao banned rare-earth exports to Japan, and threatened ''further action'' if the fisherman was not released. Two days later, the man was set free.

''In order to further grow our mutually beneficial relationship based on strategic interests, I believe it is necessary for Japan and China to handle matters calmly,'' Japanese Prime Minister Naoto Kan said at the time.

The export ban was swiftly revoked, but the world had received a nasty wake-up call. China has a stranglehold on the rare-earths market, accounting for 97 per cent of worldwide production. And it was clear it was prepared to use that dominance for political, as well as economic, gain.

Japan, in particular, had to find alternative sources of rare earths, or risk whole industries being affected.

New applications for rare earths are being discovered all the time. The 17 closely related elements have remarkable magnetivity and help make phones smaller, TVs bigger and display panels brighter. They also represent our best-known chance to make energy-efficient technologies, such as electric vehicles, wind turbines and solar cells financially viable.

''We are as addicted to rare earths as we are to oil, we just don't know it,'' says Nicholas Curtis, chief executive of Australian rare-earths miner Lynas Corporation.

Even before the diplomatic incident, China had begun to restrict exports of rare earths, to ensure it could meet the demand from its local industry. Shipments have been cut from 67,500 tonnes in 2005 to 30,250 tonnes last year. With prices of some rare earths having soared up to five times since the start of the year, the worldwide race to break China's stranglehold is officially on. ''I think the situation has become more acute more rapidly than anybody would have ever predicted,'' Curtis says. ''The crisis in the supply of rare earths in the last year or so has resulted from a combination of events that came together and created this perfect storm - and that focused policymakers very heavily on the strategic implications on rare earths.''

With California-based Molycorp also in the mix, Australia's Lynas is widely considered to be leading the pack. Much like Andrew Forrest's Fortescue Metals in its infancy, Lynas has rocketed from a penny-dreadful stock to a company worth $3 billion almost on expectation alone - it has yet to start production.