Australian companies are making significant strides towards decreasing dependency on China for rare earth minerals, crucial for various industries, including defense systems and electric vehicles.

Firms such as Iluka Resources, Lynas Rare Earths, and several lithium producers are either refining or nearing production of essential minerals for batteries, electric circuitry, and high-strength magnets necessary for the global shift towards green energy.

Light rare earth oxides, including neodymium and praseodymium, have applications in aircraft engines, electronics, wind turbines, and electric vehicles.

Conversely, heavy rare earths, particularly dysprosium and terbium, are vital for permanent high-strength magnets utilized in robotics and defense technology, especially in offshore wind turbines that operate with minimal maintenance.

The strategic significance of these minerals has increased amid international trade tensions, particularly between the United States and China.

In a response to U.S. tariffs, China has implemented export controls on several key minerals, including tungsten and molybdenum, which are crucial for high-tech products.

China's Commerce Ministry attributed these measures to the protection of national security interests.

Historically, China has maintained a dominant position in the global rare earth market, accounting for approximately 90% of the world's rare earth oxides utilized in manufacturing.

This has prompted countries worldwide to seek alternative sources for these minerals, especially as global trade relationships shift.

Iluka Resources is currently constructing a comprehensive rare earths refinery in Eneabba, Western Australia, with the aid of a $1.65 billion loan from the Australian federal government.

The company aims to produce 10% of the world's rare earth oxide supply and refine a significant portion of critical heavy rare earth oxides within the next decade.

Lynas Rare Earths, estimated at $6.5 billion, has commenced operations at its newly established $800 million mixed rare-earth processing facility in Kalgoorlie.

The output from this site will be transported to Malaysia, where Lynas operates the largest single rare earth processing plant globally.

Additionally, Lynas is setting up a heavy rare earths refinery in Texas, supported by $384 million funding from the Biden administration, to enhance U.S. access to these vital resources.

Neha Mukherjee, a senior analyst at Benchmark Mineral Intelligence, stated that while Australia currently contributes only 1% of global heavy rare earth mining output, projections suggest this figure could rise to 14% by 2029. However, expanding refining capacity in Australia poses significant financial and technical challenges.

The Australian Securities Exchange (ASX)-listed IGO, in collaboration with China's Tianqi Lithium, began producing battery-grade lithium hydroxide at its Kwinana refinery in 2022. However, due to a decline in demand for electric vehicles, the company has had to halt parts of its operations since January 2023.

As countries navigate the evolving landscape of trade relationships and security concerns surrounding mineral supplies, analysts anticipate increased usage of critical minerals as leverage in international negotiations.