Iluka Resources CEO Warns of Market Manipulation by China in Rare Earth Sector
An Australian mining executive has raised concerns over China's influence on global rare earth prices, describing it as an "existential threat" to Western nations. Tom O'Leary, CEO of Iluka Resources, highlighted China's control over the rare earths supply chain during a global mining conference in Japan.
O'Leary argued that China's dominance has led to market manipulation, citing significant price fluctuations on the Asian Metal index over the past three years as evidence. He noted a directive from the Chinese government in early 2022, which urged rare earth firms to "guide product prices to return to rationality," as a clear example of this manipulation.
Despite predictions of a future supply squeeze and rising prices, rare earth prices on the Asian Metal index remain at historic lows. O'Leary pointed out that at current prices, no producer, irrespective of location, is profitable. China currently produces over 90% of the world's rare earth oxides and controls the global supply of key elements such as dysprosium and terbium, essential for high-strength magnets used in defense applications and renewable energy technologies.
In response to China's monopoly, governments worldwide are seeking to secure critical materials essential for the clean energy transition. Iluka Resources is constructing a refinery in Eneabba, north of Perth, with a $1.25 billion backing from the Australian government. This facility aims to meet more than half of the West's forecast demand for separated light and heavy rare earth oxides by 2030.
Julian Kettle, senior vice president of metals and mining at Wood Mackenzie, warned that taxpayers would likely bear the cost of developing these new refining and processing capabilities to counter China’s dominance. He emphasized the need for a strategic dialogue with China, rather than continued antagonism.
Data from Adamas Intelligence indicates that China's reserves of heavy rare earths could be depleted within 11 years at current consumption rates. This may explain Beijing's efforts to secure binding offtake agreements with smaller miners and increase its stake in Australian resource companies like Northern Minerals.
In light of these developments, Australian Treasurer Jim Chalmers recently mandated that Chinese investors reduce their stakes in Northern Minerals to enhance supply chain security.
Kim Beazley, chairman of the US Asia Centre think tank and former defense minister, suggested that Iluka's ability to supply a significant portion of the West's rare earth needs could shift the strategic balance away from China.
