I'm Daniel James, and you're listening to seven AM. When Anthony Alberinezi met with Donald Trump. This week, the two leaders cut a deal on critical minerals worth thirteen billion Australian dollars. Australia has them and the US needs them. And as we're settle into a new phase of a relationship with our most important ally, this is our crucial bargamanship as the US tries to break China's grip and
the supply chain of critical minerals. China's global domination has been in the works for decades, a grand plan that gives China ready access to materials essential for everything from fighter jets to wind turbines. It also gives Beijing extraordinarilyverage over Western economies and defense forces. Today, columnists for Australian Foreign Affairs Ian Verenda on China's long game on critical minerals domination and the old pile of mining waste in
Western Australia which could upend it. It's Sunday, October twenty sixth. This episode was originally published in July, and we keep hearing about China's stranglehold over the critical mineral supply globally. How did that happen? Can you take me back to where this story began for them?
Look, it began way back, more than thirty years ago, really, And I guess the first inkling that we had that this was about to take place was a speech that Deann Jhaping gave in around nineteen ninety two on a tour of China.
At this crucial point in China's reform and opening up, Dong Chaoping once again demonstrated that he possessed the political courage and wisdom needed to guide China along the right path.
He was never the president, but he was really the leader of China at the time, and he made this announcement at at a gathering where he said, the Middle East has oil, China has rare earths.
His comments were a declaration that projected China's reform and opening up into a new era and once again placed China onto the fast track of development.
And from that point on, China went down this path of exploiting the rare earths that it had, which was a fairly fast sighted kind of vision for den because you know, rare earths aren't really all and rare. They're scattered, right, across the Earth's crust, but they're not usually a needing
form of concentrated way to extract easily. So you know, mining becomes economic when you've got large quantities enriched like gold, oars or something like that, whereas rare earths are just scattered in very very minute quantities across a broad range, so they're very difficult to mine economically, and then when it comes to the processing of it, it becomes a really dirty, difficult task. They often run alongside things like uranium and thorium, which are really quite toxic things to
mine with. So it was an incredible, I guess, vision to be able to see this and to take advantage of it to the extent that they've really become absolutely vital to the modern economy. So the Deng saw that China had an advantage with rare earths in China, but what he did was he then insisted that they not just extract, but they refine and manufactured using those goods as well.
So they not only have the minerals, they also have recognized the power in dominating the processing of those minerals. So how did they go about monopolizing that.
The state has not held back in ensuring that it retains its dominant position. And they've dominated by really quite overt use of strategies where they really tend to manipulate market prices, put all kinds of stress and strains on competitors, usually through market forces, and also by running propaganda campaigns as well. There's a good example. And America really only had one rare Earth's mind. It shut down I think
round about in the eighties nine. As it was reopened round about twenty ten, a company called Molly Corp decided to reopen it. Rare earth prices at that stage were really very strong.
Let's find out what's ahead for Maleycorp and the rare earth metals market. We have Mark Smith.
He is Maleykorp's chief executive.
Mark, thanks so much for coming in. Good to see you.
Finally, by twenty fourteen, Molycorp had gone broke and was forced to shut down. Do you believe that prices are being manipulated by Chinese producers? The market was suddenly flooded with all kinds of rare earths, and so Molecorp just could not compet against this.
Chinese producers have been very clear about two things. They are going to continue to restrict the export of these materials to the rest of the world, and we can expect an irreversible trend, as they call it, for higher prices.
The mine has since reopened, by the way, but it just goes to show that the extent of the power that China was exerting. Then a few Australian companies have come under pressure as well. An Australian company called Linus opened an operation in Malaysia. Suddenly there was a propaganda campaign running right through that area of Malaysia talking about the environmental impacts of the refining process, and it turns out that it was being run by a Chinese group
called Dragon Bridge. This whole propaganda campaign, which incidentally has been running another propaganda campaign against Linus with its proposed refining operation in America at the moment. But it just goes to show that the pressure that China exerts is firstly against any competitors, and then they'll take retaliatory action against any country or any company that threatens its future well being. You've seen it in lithium. Lithium prices have
collapsed in the past eighteen months. You've seen it in nickel nickel prices have crashed. China has basically exercised its power with nickel by pouring vast amounts of money into Indonesia. Indonesia ten years ago provided around about six percent of the world's refined nickel and now provides around six percent. So that's just in a decade. And as a result,
Australia's nickel operations have shut down. I mean, Andrew Forrest, who you know, the person behind Fortescue, who's one of Australia's biggest iron ore miners, spent around three quarters of a billion dollars just two and a half three years ago to buy up a whole lot of nickel operations in the West and was forced to close them within a year.
So as it stands in China succeeded in fulfilling Deng Jiaoping's vision beyond probably beyond what he could have even imagined. So how would you describe China's position when it comes to critical minerals right now?
Look, it's absolutely dominant in the space of critical minerals, and the domination depends on what part of the rare earth spectrum you're talking about. I think it's anything from about seventy percent from the lower end of the rare earth spectrum up to total domination one hundred percent when you get what's known as heavy rare earths. So it's a what's known as a monopsony. It's the big player, it's the elephant in the room when it comes to this industry.
Coming up after the break, how a pile of mining waste in Western Australia could hold the key to upbending China's stranglehold of the rare earth industry. And why does it matter if China dominates the rare earth supply chain? How does that affect us?
Well, I mean it'll be not just to Australia's advantage, but to the world's advantage if there is an alternative source, you know. I mean, at the moment, we're seeing all these negotiations take place between America and China over trade
and over a range of other areas. What people don't realize is that America's defense, and particularly it's aerial defense, the flagship of the defense fleet, the FA thirty fives, require huge amounts of these magnets that China manufactures out of rare earths that only it produces, you know, refined rare earths. So America's defense is largely dependent upon getting
these components from China. So if there was ever any kind of conflict between America and China, China really does send to hold the Whipan.
And you've been reporting on how Australia is trying to shore up its own supply chains. Can you tell me about what's been happening in our back western Australia.
Yeah, look about about thirty years ago, there is a company called Aluka. It actually had a different and name back then, but it was a sand miner essentially, and it was basically getting you know, mineral sands, refining them. And one of the byproducts was a think called monozite, which contains rare earths, and there was a market for it back then and it was being used I think
for fluorescent lights. Suddenly that market collapsed and nobody knows that I look at these days who was responsible for it. But someone with a lot of foresight decided that rather than just dump all this stuff, they would store it. So they did this huge pit and started storing all
this monocite. And what's happening there now is that it's building a refinery that will be capable of refining not just ordinary rear earths, but what's known as heavy rare earths, which are very difficult to obtain, elements that are required for super high end uses in wind turbines, in aviation, and particularly in defense purposes as well. And so we we have this Australian company which is now going to have a refinery which will be the only refinery outside
of China that can produce this kind of stuff. In the past few weeks, in fact, Linus, the other Australian company, has announced that it is also trying to upgrade its refining processes. Possibly they've got a couple of little operations in West Australia and the big one in Malaysia as well, so it looks like they're going to try and be beat. I look it to the punch to seeing who can be the first refiner outside of China to be able to compete with the Chinese. Will provide the Western world
with an alternative source. So we would be providing for the world for the first time a competitive source and an alternative source of these really valuable minerals.
So there's clearly advantages to Australia being a bigger player in the critical mineral space. We know that both Morrison and Albanezi governments has spent billions backing the Luke and Mine. So what does it say about how our governments thinking about this industry.
We can't just sit back and allow ourselves to be at the end of global supply chains. We need to put it simply. We need to make more stuff here. That simple.
So the other and easy government in recent times has suggested a kind of reserve of these minerals that the government would stand behind it the industry and buy up these reserves when the price was low.
We have some of the world's largest reserves of critical minerals and the new strategy will set a vision for the sector.
And there are some people in the industry who think that's a great idea. The chief executive of LINEUS she thought that it wasn't a terrific guide here at all because I think she considered that this might print profits at some stage, but the economic benefit is vast. Let's not kid ourselves there, and so there's an economic incentive
to maintain that power. But the geopolitical advantage of having domination out of some of these things, there's just difficult to imagine just how significant that is, because if you have domination over the components that are required for defense situations, well, that puts you in an extraordinarily powerful political position as well, particularly when it comes to negotiating well anything from trade to defense packs to where you'd think you might be in the world pecking order.
And fascinating stuff. Thank you so much for your time, pleasure. I'm Daniel James seven am will be back on Monday with an episode on the National Anti Corruption Commission. The NECK is over two hundred employees and then your budget of over sixty million dollars and has received over five thousand submissions, but as yet to land a single major finding. We look at how NAK is defending itself and whether there is any hope of regaining public trust. See you then,