Can Australia capitalise on rare earths supply diversification?

The rare earths supply chain is set for greater diversification, with new mines and processing plants outside of China coming online in the second half of the decade.

This shift is driven by both economic and geopolitical factors as Western governments prioritise the strategic importance of securing a resilient and independent supply chain.

As global demand for rare earths continues to rise, driven by their critical role in renewable energy, electric vehicles, and defence applications, Australia is emerging as a key player in the efforts to reduce reliance on China, which currently dominates the sector.

According to Benchmark product director for multi-commodity Daan de Jonge, the future of the rare earths supply chain is intricately tied to geopolitical considerations and national supply chain strategies.

“The world is reliant on a single source for the majority of rare earths supply,” he said.

“Investments are being driven not only by economics but also important geopolitical considerations. The future of the supply chain is wrapped up in the complexity of criticality and national supply chain strategies.”

The United States is leading the charge in building a rare earths supply chain independent of China, with the Department of Defence investing nearly $500 million since 2020 to create a “mine-to-magnet” supply chain.

Additionally, the U.S. Export-Import Bank has allocated over $1 billion in debt financing for rare earths projects in both the U.S. and other free trade agreements.

Australia, alongside the U.S., is expected to account for the largest share of non-Chinese rare earths supply growth, with the global supply of mined rare earth oxides from non-Chinese sources projected to grow 5.8 times by 2030, according to Benchmark’s Rare Earths Forecast.

This dramatic expansion will see non-Chinese production rise from 23,000 tonnes in 2023 to over 135,000 tonnes by 2030.

The Australian government is taking significant steps to support this growth, as the government has committed to building a sustainable, secure, and diverse supply chain for critical minerals, including rare earths, through investments and strategic partnerships.

Programs such as the Critical Minerals Accelerator Initiative, that offers financial support to early-stage rare earths projects, and the National Reconstruction Fund, aimed at developing key industries, are designed to bolster Australia’s role as a global supplier.

Just last October, the Australian Government provided $5 million in funding to the Australian Strategic Materials Limited (ASM) to fund up to 50 per cent for a study to find more efficient ways of refining rare earths at its mine and processing plant.

Furthermore, the government is collaborating with key partners, including the U.S. and Japan, to enhance the resilience of critical mineral supply chains and facilitate the development of processing and manufacturing capacity in Australia.

For Australia, this diversification presents significant economic opportunities and the nation’s rich deposits of rare earths, including key elements like neodymium and praseodymium, position it to become a leading supplier to the growing global market.

This trend is expected to bring both increased investment and job creation, bolstering Australia’s standing as a critical player in the global energy transition and defence sectors.