Rare Earths vs. Rarer Resources: Navigating Geopolitical Influence

 Misconceptions about Rare Earths

Rare earth elements (REEs), encompassing 17 distinct elements, are not genuinely scarce despite their name. The real rarity lies in the low-cost, low-pollution processing capacity for these elements. According to the International Energy Agency, China holds 33.8% of the world's rare earth reserves as of 2022, but it controls nearly 70% of upstream mining and extraction, almost 90% of midstream processing and refining, and at least 50% of downstream applications. These applications span crucial sectors like electronics, electric vehicles, and renewable energy technologies.

Strategic Importance and Dependency

Though required in minimal quantities, rare earth elements are vital for numerous industrial and defense applications. China's dominance in the rare earth supply chain has raised significant concerns. Former defense minister Kim Beazley noted that approximately "3,400 American weapons systems contain Chinese rare earth components," highlighting the strategic vulnerability posed by this dependency.

Multinational Countermeasures

In response to China's dominance, multinational partnerships are emerging to mitigate its influence. Australia's recent divestment decision reflects its alignment with global allies, aiming to reduce reliance on Chinese rare earths. These collaborative efforts are based on the assumption that China might leverage its control over the rare earth supply chain to gain geopolitical advantages.

Australia's Strategic Opportunity

For Australia to capitalize on its innovation capabilities, it should focus on becoming an indispensable technology partner in advanced minerals processing and refining technologies—referred to as the rarer resources. This strategic shift would position Australia advantageously within the global value chain, moving beyond merely scaling up extraction and manufacturing.

Conclusion

While rare earth elements are not inherently scarce, the processing capabilities for these materials are limited and geopolitically significant. As global powers seek to counterbalance China's dominance, Australia's role as a leader in advanced processing technologies could be pivotal. Emphasizing innovation and strategic partnerships will enhance Australia's position in the global market and reduce dependency on Chinese rare earth elements.