Iluka boss warns Chinese rare earth domination will leave Western economies vulnerable
The boss of Iluka Resources has warned China’s near-monopoly of the rare earth industry is a threat to Western economies and defence.
Iluka Resources boss Tom O’Leary has warned China is weaponising its domination of the rare earth market, driving down prices to keep alternative sources out of the market while buying up access to deposits in Australia.
Speaking at Iluka’s annual shareholder meeting in Perth on Tuesday, Mr O’Leary said Chinese state-owned entities had a “pervasive” influence on pricing for rare earth metals, and were prepared to wear a loss to keep other producers out of global markets.
“China’s dominance of the rare earths industry, which in the case of heavy rare earths is near-total, is achieved through production supremacy and its influence over pricing,” he told shareholders.
Iluka is building its own rare earth refinery at its former Eneabba minerals sands mine in the Mid West of WA, but is still in negotiations with the federal government over an extension to its $1.25bn lending facility from the government’s Critical Minerals Facility, needed to cover a construction blowout which will take the plant’s cost to as much as $1.8bn.
Mr O’Leary pointed to the Chinese government’s decision in December to ban the export of knowledge and technology related to the complex chemistry needed to turn rare earth deposits into metals, saying the move was a clear indication of China’s intent to maintain its industry dominance — both for commercial and defence purposes.
“In addition to being essential for the production of electric vehicles and wind turbines, the key heavy rare earths, dysprosium and terbium, have critical applications in defence and national security,” he said.
Mr O’Leary has previously backed calls for a domestic reservation of Australian-mined critical minerals, and on Tuesday said Australia and its allies needed to support a price structure for metals separate from Chinese sources of supply.
“China’s influence over the global rare earths market is pervasive, including through pricing indices such as the Asian Metals Index,” he said.
The Iluka boss said rare earths differed from emerging markets for other metals needed for electrification of the transport industry and energy networks — such as lithium, copper and nickel — because China also dominated production of rare earths, particularly heavy rare earths.
“It is this monopolistic production, combined with interference in pricing, that is resulting in market failure; and rare earths are among very few metals where China has demonstrated a preparedness to weaponise its control,” he said.
“Our CFO, Adele Stratton, will present at an investor conference in the coming days and will demonstrate through publicly available information that no participant, regardless of geography, is making any money at today’s prices.”
The alternative to support for the establishment of new supply chains outside of China, Mr O’Leary said, was for Western governments to also accept the looming Chinese domination of electric vehicle production, weaken defence industries which rely on rare earth elements, and put the decarbonisation of energy and transport networks in Chinese hands.
“Will they acquiesce to their flagship car makers merely managing the assembly of electric vehicle parts supplied by Chinese companies — if indeed China is willing to permit such activities taking place at all?” he said.
Mr O’Leary told shareholders the company welcomed new foreign investment rules floated by federal treasurer Jim Chalmers this month, as well as the Albanese government’s support for local manufacturing.
But he said more must be done to limit China’s influence over Australian critical minerals deposits.
“There are clear, ongoing efforts, including by Chinese state-owned entities, to extend their nation’s monopoly by controlling Australia’s rare earth deposits,” he said.
“From Western Australia to Western Victoria, this is taking place via a number of binding offtake agreements with various companies; and via ownership.”
Iluka shares were up 4.9 per cent to $7.96 at 1545 AEST.
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