A World Leader In Renewables, Can Australia Save U.S. Rare Earths

Forbes

01-05-2025

Rare earth refineries near the Mongolian city of Baotou pictured behind a blackened lake in 2012.
The issue is that the U.S. imposition of tariffs on China, in a dramatic trade war, has recently led China to ban the export of heavy earth metals to the U.S. Why is this an issue? Rare earth metals are important for energy security and economic advancement. They are key to the strongest batteries used in wind turbines to make electricity, as well as electric motors in EVs.
But rare earths are also critical pieces of economic advancement, such as semiconductor chips and robots. America's race to lead in artificial intelligence (AI) has been fueled by its access to high-grade chips. Last, but not least, are U.S. defense systems that depend on rare earths: missiles, radar, and jet fighters. All of these applications could be undermined by China's export bans.
But Australia also mines rare earths. The country, rich in minerals, is also advanced in energy technology. It leads the world in green electricity supplied by wind and solar and battery storage. Since 2023, one state, South Australia, has been operating its grid with 72% supplied by renewables, and just last week announced an uptick in the supply that should help it reach its goal of 100% by 2027. Integral to this is Australia's development of grid-scale battery storage systems (BESS) that were invented down under by Elon Musk in 2016, and shown to stabilize the intermittent supply of electricity.
Recently, the government of Australia has appointed sizeable funding that includes mining and processing of rare earths. The overt goal is to shore up Australia's security, but also with an eye to helping the U.S. which is kind of stuck because of the trade impasse with China. Let's look further into this.
Rare earths are 17 elements at the upper end of the Periodic Table. They have funny names like yttrium, neodymium, and europium. They exist in lots of places around the world, but are very difficult to process to purity. Why are they important? Rare earths are used to make the best magnets used in phones, EV motors, wind turbines, and jet engines. TV and computer screens with rare earths show colors better. They are also key to advanced technologies in the medical field (MRI and laser surgery), as well as defense systems.
Resources for rare earths usually contain radioactive elements, and this is why few countries have mines and even fewer will process the principal mining ore. Europe steered away from rare earth mines because of radioactive waste.
But China embraced rare earths after Deng Xiaoping famously stated in 1992: 'The Middle East has oil, and China has rare earths'. China then began to focus on rare earth mining and processing using cheaper labor costs and lower environmental restrictions. According to the International Energy Agency (IEA), China produces 61% and processes 92% of the world's rare earths. It's easy to see that China controls the supply chain, and this is what concerns the west.
Because of Trump's tariffs, China retaliated on April 4 by placing restrictions on exports of seven rare earths, the heavy rare earths. This is a big deal because the U.S. imported 70% of rare earths from China between 2020 and 2023. So last week, Trump wrote an order that the commerce department find ways to produce rare earths in the U.S. and not have to rely on imports from countries like China.
Meanwhile, prices of rare earths will surge in the U.S., and companies that make electronics (smartphones) and defense (missiles, radar and jet fighters) will be hurt. The order quoted, 'Critical minerals, including rare earth elements, are essential for national security and economic resilience.'
One simple truth makes this clear. An American F35 supersonic strike fighter jet uses 420 kilograms of heavy rare earths in making the plane.
Sadly, the U.S. is holding a poor hand in regard to rare earths. The country has only one mine that is operating, and no capacity to process the minerals—instead they are/were sent to China for processing. Second, the ensuing trade war means the U.S. may now be restricted in its imports of rare earths from China. Third, the U.S. has alienated many other friendly nations by laying on tariffs, while some of these might have agreed to export processed rare earths to the U.S.
All this helps to understand President Trump's ideas about exploiting Ukraine and Greenland for rare earths, even though the latest map does reveal five separate locations in Ukraine where rare earths are found. The problem is, production in such enterprises would presumably be starting from square one.
The prime minister of Australia, Anthony Albanese, has recently pledged A$1.2 billion to build a strategic reserve for critical minerals, if he wins the national election to be held next month. The reserve would contain critical minerals such as lithium and cobalt, top producers in Australia, but would also include rare earths. Albanese said the key would be minerals that are vital for the country's security, and that of its partners.
This opens the door to the U.S. of course, where talks with Trump have exempted some minerals from the 10% tariffs laid on exports from Australia to the U.S. The latest version of the strategic reserve allows sale of Australia's minerals if China mandates export controls. But could this loosen China's control?
Albanese said Australia would prioritize minerals that are key to its security, and that of its partners, including rare earths. But could his plan challenge China's dominance?
One company, Arafura Rare Earths, out of Perth in Western Australia, received in 2024 nearly a billion dollars Australian to build the first combined mine and refinery for rare earths. In November of 2024, another company, Lynas Rare Earths, started its first processing plant, also in Western Australia. Lynas also has a processing plant in Malaysia and one being built in the U.S. But analysts said it could be 2026 before Australia stops depending on China's processing.
Perhaps the most interesting venture is Iluka Resources that has mountains of tailings from its sand-mining enterprise north of Perth. They are finishing a plant to refine the tailings which are high in heavy rare earths. This will be the only facility outside of China that can deliver heavy rare earth metals.
Despite the optimism, one Australian analyst expressed doubt that Australia could solve the problem for the U.S. because the refinery processing of rare earth metals will still be controlled by China, at least for the near term.