China's new export controls on certain heavy rare earths and magnet materials could boost supply chain development outside China, but there is no immediate solution to the severe squeeze hitting certain sections of the international market.
China on 4 April extended its export control scheme to some medium and heavy rare earth products — samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium — in response to the US' reciprocal tariffs announced on 2 April. NdFeB magnets containing terbium and dysprosium as well as other magnets containing heavy rare earth elements are also now included in the scheme.
The news has sparked fresh momentum towards developing a rare earth value chain outside China, Perth-based mining firm Australian Strategic Materials' (ASM) chief executive and managing director Rowena Smith told Argus in an exclusive interview on 15 April.
"People have [so far] been slow to commit, even though we've had that recognition of [supply chain diversification] being a strategic imperative since Covid," Smith said.
Smith is optimistic that this is a moment of material change, anticipating that China's export restrictions and US president Donald Trump's desire for a stronger domestic manufacturing industry will provide fresh momentum to all three pillars needed to build a non-Chinese rare earth supply chain — business will, funding and policy support.
ASM is engaging with several government authorities including the US Department of Defence (DoD), plus several US state governments and sovereign funds for funding and policy support to replicate its South Korean rare earth metallisation plant, Smith said. That metallisation plant is currently operating and can separate light, medium and heavy rare earth metals, albeit in much smaller volumes compared to Chinese capacity.
The US DoD is eager to develop a domestic mine-to-magnet supply chain and has awarded millions' worth of contracts and funding to Australia's Lynas Rare Earths and the US' MP Materials. The US added Australia as a "domestic source" to Title III of the US Defense Production Act in 2024, boosting US investment in the production and purchase of Australian critical minerals.
ASM is not the only Australian prospective mining firm hoping to capitalise on this. Another developer Northern Minerals suggested that China's move may encourage global permanent magnet buyers to look for non-Chinese suppliers. Its chief executive Shane Hartwig on 8 April said it "looks forward to playing a central role in building Australia's critical minerals future".
There are also numerous early-stage projects across parts of Africa and South America, which are hoping to capitalise on the current sense of urgency to get their operations moving more quickly.
No short-term solution
But these developments will not help the industry solve the current supply crunch in the short term. It takes many years for new rare earth projects to become stable and commercially viable options, as demonstrated by the experiences of Lynas and MP. Of the rare earths that are extracted and separated outside China, the vast majority is made up of light rare earths. Separation of heavy rare earths outside China, many of which are caught up in Beijing's export restrictions, is still at a nascent stage and many years from making a dent in the global supply balance.
For instance, Northern Minerals is expecting to give a definitive feasibility study update in the second quarter of 2025, while ASM's Dubbo project is construction-ready and expecting to start a final investment study soon, which would then take around 27 months for construction to be completed, according to Smith. Another Australian rare earth developer Arafura is currently at the stage of securing equity and progressing towards a final investment decision (FID). This means that the global supply chain is very unlikely to see any fresh supply of non-Chinese heavy rare earth before 2028, given that it typically takes at least 2-3 years from FID to commercial operations.
