- by Graham Holton
- The Guardian
- Issue #2168
Photo: pxhere.com
Prime Minister Anthony Albanese seems to have sealed a deal on rare earths with US President Donald Trump. Australia and the US will put $1 billion each into Australian and US rare earth projects. Albanese wants to make Australia indispensable to the US in order to reduce tariffs on our copper, aluminium, and pharmaceutical exports. A crucial part of this plan is the Labor government’s commitment of $1.2 billion in the May 2025 budget to set up a critical minerals strategic reserve. These are minerals essential for modern technologies, defence, and the clean energy transition, including lithium, cobalt, manganese, rare earth elements, and vanadium.
Albanese believes that if the US views Australia as a reliable supplier of militarily useful minerals, then the US may be inclined to grant Australia favourable treatment and lower tariffs. So far, he’s wrong. Trump is not inclined to lift tariffs on Australia, merely saying that Australia is already on a low level of tariffs.
United States policymakers are concerned about supply vulnerabilities as China currently dominates rare earth extraction, separation, processing and magnet manufacture. Recently the Chinese Ministry of Commerce’s Announcement No. 61 of 2025 implemented the strictest rare earth and permanent magnet export controls to date. The Ministry made it clear that any requests to use rare earths for military purposes will be automatically rejected. China’s policy is to prevent direct or indirect use of Chinese-origin rare earths or related technologies to foreign defence supply chains. The move strengthens Beijing’s leverage in upcoming talks with President Trump while undercutting US efforts to bolster its industrial base.
China’s leverage extends from mining to refining and manufacturing, giving it significant control over the supply of rare earth elements and its products. China holds 60 per cent of the world’s reserves of rare earths. It processes 90 per cent. The US does not have the refineries, technical know-how, trained personnel or scientists to upset China’s domination of the international market.
China has developed large-scale, chemical-intensive processes with new environmentally friendly refining methods. The process is complex, requiring dozens of steps to turn the ore into usable materials. In the 1990s rare earth processing was extremely damaging to the environment, but now China has developed and implemented cleaner sustainable and efficient refining technologies to turn out metals with the 99.9 per cent purity needed for the electronics industry at a price that the US cannot match.
Rare earths are crucial for various defence technologies, including F-35 fighter jets, Virginia- and Columbia-class submarines, Tomahawk missiles, radar systems, Predator unmanned aerial vehicles, and the Joint Direct Attack Munition series of smart bombs. They are also needed in highly advanced technologies, such as sub-14-nanometer semiconductors, next-generation memory chips, semiconductor manufacturing and testing equipment.
All export licences will now be subject to case-by-case review by Chinese authorities. The Ministry introduced these export restrictions on seven rare earth elements in retaliation for President Trump’s new tariffs on Chinese goods. While the US struggles to gain supply, China is rapidly scaling up its munitions manufacturing capacity and acquiring advanced weapons platforms and equipment at a rate estimated to be six times faster than that of the United States.
The US defence industrial base faces significant challenges and has limited production capacity and ability to rapidly scale up to meet rising defence technology needs. China’s new restrictions will only deepen US vulnerabilities, further increasing the capability gap and allow China to accelerate the expansion of its own military capacity at a faster pace.
In the US, Noveon Magnetics is the only manufacturer of rare earth magnets. Noveon Magnetics and Lynas Rare Earths have announced a strategic partnership focused on building a scalable, domestic supply chain for rare earth permanent magnets.
In July 2025, the Department of War (DOW) invested US$400 million into MP Materials, making the US government the company’s largest shareholder. The deal also includes a 10-year price commitment of US$110 per kilogram for MP Materials’ neodymium-praseodymium products. The DOW’s Office of Strategic Capital extended a US$150 million loan to expand MP Materials’ Mountain Pass facility in California, adding heavy rare earth separation capabilities to strengthen domestic processing capacity. The DOW has entered into a 10-year agreement for 100 per cent of the facility’s magnet output. It will take time to ramp up the capacities needed for the DOW.
The US Department of Energy recently announced that the Ramaco Brook Mine in Wyoming contains 1.7 million tonnes of rare earth minerals, making it a ‘turning point for America.’ The company is seeking federal funding to set up processing and refining plants.
China is the world’s largest holder of rare earth reserves at 44 million tonnes and is its leading producer. Vietnam has 22 million tonnes, Brazil 21 million tonnes, and India has 6.9 million tonnes. Australia is fourth with 5.7 million tonnes.
China’s expanded restrictions on rare earth derivatives and magnet exports have given Australia an opportunity to fill US demands. Albanese is hoping to gain geopolitical clout by being part of a more diversified and secure mineral supply chain, encouraging increased long-term US investments in Australia’s mining and processing industries. Australia wants to capture more value added rather than export raw rare earth ores, to build domestic downstream capacity. The Labor government wants to develop downstream processing in order to negotiate or leverage improved trade deals with the US.
Global demand for rare earths is set to triple by 2040, because of increasing demands for electric vehicles, renewable energy infrastructures and data centres. In the meantime, Australia wants to establish significant leverage over supply chains crucial for US national and economic security. The problem is that Australia lacks the scientists, engineers, and expertise required to process and refine rare earth metals to 99.9 per cent purity. That expertise and those people can’t be conjured up overnight.
Since the colonial period Australia has exported raw materials and imported finished goods. The US has its own critical mineral reserves but needs refined products, something Australia is not able to supply. It would take massive and sustained funding for Australia to become a global player in rare earths. At present Albanese’s gamble could be short lived.
