Rare earths: the bigger truth behind the US-China trade dispute - Alkane Resources Ltd
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Rare earths: the bigger truth behind the US-China trade dispute

Mark Twain said ‘Never let the truth stand in the way of a good story’, according to a quick Google search¹.  This may be good advice for novelists, but it’s bad news in every sense when journalists apply it. The truth about rare earths underlies the shiny story of the US-China trade dispute, which our media have lazily plucked off the surface. Anyone dependent on rare earths supply – i.e. everyone in developed countries ­­– needs to mine the deeper history and understand why the narrative will end badly for us if we don’t take immediate, well-informed action.

The backstory

Rare earths are a group of 17 elements, known as the ‘vitamins of industry’ because many applications require only minute – but critical – amounts. Permanent magnets are an exception, being composed of 31% rare earths. Permanent magnets are the main driver of the massive global rare earths market, due to their multiple applications in advanced technology for clean energy, clean transport, information and communications, defence and medicine. Permanent magnets are critical for high-performance electric vehicles, wind turbines, smartphones, computers, and magnetic resonance imaging, for example.

The inciting incident²

In 1992, Deng Xiaoping said ‘There is oil in the Middle East. There is rare earth in China.’ China’s rare earths industry began with mining and extraction and has extended to downstream manufacturing, due to the government’s Made in China 2025 policy. China has conquered more than 90% of the rare earths market, securing its dominance of high-tech industries.

The rising action³

But now, as global demand for rare earths and permanent magnets grows exponentially, China’s water crisis and ‘war on pollution’ is reducing its domestic supply. Last year, China became a net importer of rare earths.

How will China pay an environmental clean-up bill of US$30-40 billion, a result of decades of unsustainable rare earth mining? With current annual market value of US$3-4 billion, higher rare earth prices would cover this cost within ten years or so.

Chinese companies are moving fast to secure foreign sources of rare earths, investing in projects in Australia, Africa and elsewhere. The Chinese buy cheap raw materials abroad and capture most of the value at home. While China secures its rare earths supply and builds its manufacturing advantage, the rest of the world is depending on dwindling stock piles (2-3 years’ worth) and debating a trade dispute when we should be taking similar action. As China knows, to win the end game you must control your own supply for defence and economic security.

Even if the rest of the world leaps into action immediately, there will be a lag of up to a decade before new rare earths projects replace Chinese supply. Despite the urgency, other governments and private investors have postponed action (to China’s advantage) to ponder a question left unanswered by mainstream media: If global demand is rising fast, and six Chinese state-owned enterprises monopolise supply, why are rare earth prices still low?

I have previously outlined some of the big changes affecting the price of rare earths in recent years. Currently, China is deliberately keeping prices low to discourage investment by other nations in new rare earths projects, creating opportunity for Chinese companies and state-owned enterprises to fund them and exert control over foreign resources.

If their own governments and industries fail to invest, non-Chinese mining companies will turn to China for financing and offtake agreements. Other nations will consequently lose sovereignty over their resources as well as losing the greater processed value of their minerals.

The crisis⁴

The Chinese characters for crisis signify danger and opportunity⁵.  It’s difficult for stakeholders outside the rare earths industry bubble to distinguish between truth and fiction, when superficial sound bites make front-page headlines and attract government attention. If they want to change the outcome of the narrative China is currently dictating, how do other governments and private investors distinguish between good rare earth projects and dodgy ones?

Avoid projects with Chinese shareholders or Chinese involvement in the supply chain. Seek projects in stable jurisdictions, with detailed engineering and proven end-to-end piloting. Look for firm offtake agreements, not just MOUs. Insist on sustainable energy and water use and waste and pollution management throughout product lifecycles, as well as ethical employment practices and constructive community relations. Understand that higher prices are the cost of making the world safe for future generations.

The resolution: a happy ending in 2.5 years’ time?

Independent of China, Alkane Resources is committed to sustainability and transparency. Our world-class Dubbo Project in NSW, Australia, has been comprehensively piloted over the past decade and has all government approvals in place. The project can supply rare earths and other essential elements for 80+ years and is ready for construction, which will take only 2.5 years from funding.

To progress the Dubbo Project to construction, Alkane Resources seeks a blend of financing from export credit agencies, strategic partners and equity and debt markets. Information for investors is available here


  1. There’s no evidence that Twain said this, but it’s a good story.
  2. As every story-teller knows, the inciting incident is the event that changes the protagonist’s world and thrusts them into the rising action of the plot.
  3. A series of related incidents driven by circumstances, character flaws and false beliefs that create increasing tension in a narrative, leading to the crisis.
  4. An unavoidable moment of choice, when the hero is forced to decide how to resolve the central conflict of the story. That decision leads to the action of the climax.
  5. Or so the story goes…