Australia is at the forefront of efforts to develop an ex-China rare earth supply chain, with Benchmark believing the country is key to the supply and economic security of Western nations.
The Federal Government recently committed an extra $200 million to Arafura Rare Earths for its Nolans rare earths project in the Northern Territory.
“This investment follows $840 million in loans and grants provided to Arafura in the past year,” Benchmark senior rare earths analyst Neha Mukherjee said.
“We are witnessing a surge in capital investment announcements in the rare earth sector, totalling $US3.1 billion globally in 2024.
“84 per cent of these investments were government-led, spanning mining to recycling.”
In December, Iluka Resources secured an additional $400 million to develop Australia’s first fully integrated rare earths refinery, supplementing a $1.25 billion loan from 2022.
These investments demonstrate Australia’s critical role in the West’s strategy to reduce reliance on China, which controlled over 90 per cent of global rare earth processing capacity in 2024.
“Australia has dominated financing for upstream projects, while Europe leads in recycling initiatives and the US has committed towards magnet manufacturing,” Mukherjee said.
Other developments in the Australian rare earths sector include Lynas Rare Earths opening its Kalgoorlie processing facility, the largest outside China, backed by a $20 million Federal grant from 2023.
Additionally, the US Export-Import Bank signed a $600 million letter of interest with Australian Strategic Materials to support the Dubbo project in New South Wales.
Despite this, the viability of these projects remains uncertain without mechanisms to address rare earth price fluctuations.
Benchmark analysis said for ex-China producers to enter the market, they require prices 47 per cent higher than the current base case through 2029.
Although Arafura has offtake agreements with Hyundai and Siemens Gamesa, policy support may be necessary to ensure sustainable project economics.
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