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Indo-Pacific Quad countries close ranks to break China monopoly on rare earth exports

Indo-Pacific Quad countries close ranks to break China monopoly on rare earth exports

The Indo-Pacific Quad countries have launched an energetic initiative to create alternative supply chains to counter China’s curbs on rare earth exports aimed at stalling the US F-35 fighter jet programme.

Anticipating Chinese pressure tactics, the Indo-Pacific Quad, comprising India, Japan, Australia and the United States is now working together to break China’s monopoly on rare earths.

So far China has exercised a virtual monopoly on processing rare earths. But in the midst of their snowballing post-Covid 19 spat with the United States, alarm bells rang loud and clear when Beijing signalled that Washington maybe denied supply of rare earth metals produced in China.

The possibility of disruption of supply chains originating from China, in turn, woke up and galvanised Quad countries to consider collective self-reliance. Dependence on China in critical areas, was seen as a national security threat.

Within the Indo-Pacific Quad, Australia is the fulcrum that can liberate the region’s democracies and like-minded countries from arm twisting by China, which can leverage its rare earths’ monopoly to exercise political control.

Australia is the world’s second largest producer of rare earths, though its output is much smaller compared to that of China.

But this situation may change rapidly, as Australia has begun to mount a serious effort to bridge the gap with China. Four Australian companies have advanced rare earths projects. Three of them are in Australia, while the fourth is located in Tanzania. Their focus is to ferret neodymium-praseodymium—a combination rare earth metals for manufacturing high strength permanent magnets, which are used in electric vehicle engines. Funds have been allocated for further exploration in Australia along two massive 2500-kilometre-long corridors.

Rare earths are strategic minerals vital for the production of anything raging from laptops, electric car batteries to missile guiding systems. “There are 0.15 grams of palladium (a rare earth metal) in an iPhone, 472 kilograms of combined rare earths in an F-35 fighter jet and four tonnes in a Virginia-class submarine,” the Sydney Morning Herald has reported.

A report published by Financial Times said that “China is exploring limiting the export of rare earth minerals that are crucial for the manufacture of American F-35 fighter jets and other sophisticated weaponry.” The move is a fallout of the deteriorating relations between the US and China. By adopting the move, China is signaling to the US that its stance towards Washington is apparently not softening despite Joe Biden’s entry into the White House.

"The government wants to know if the US may have trouble making F-35 fighter jets if China imposes an export ban," FT quoted a Chinese government official as saying.

Rare earth elements comprise a group of 17 chemical elements. While they are all metals, these elements are mostly found together.

Reinforcing Indo-Pacific bonds, Australia, in June inked a preliminary agreement for supplying critical minerals to push India’s transition to a new-energy economy. Australian Resources Minister Keith Pitt said that Canberra could become India’s top supplier of cobalt and zircon.

Antimony, lithium, rare earths and tantalum could be added to the list. “India presents growing opportunities for Australia’s critical minerals, especially as the nation looks to build its manufacturing sector, defence and space capabilities,” Pitt said. He pointed to New Delhi’s ‘Make in India’ programme, and its goal of moving to full electric mobility by 2030, which, he said, would drive India’s demand for critical minerals.

The deal follows a major military logistics agreement between the two countries, which lays the strategic foundation of a special relationship between New Delhi and Canberra, both facing headwinds from China. The Mutual Logistics Support Agreement (MLSA), will allow the two militaries access to each other’s military logistics facilities, take on more complex joint military exercise and improve interoperability between the security forces of the two democracies.

Australia has also worked out a rare earth deal with the US, the Indo-Pacific Quad’s most powerful partner. The Australian rare earths miner Lynas would process the mined minerals in a facility in Texas, in partnership with the Pentagon. Besides, the Australian company Syrah has earmarked a production line in the US state of Louisiana to turn graphite into graphene, for use in electric cars. Australia’s partnership with Japan in the rare earths domain is already well established, following Tokyo’s spat with Beijing over islands in the East China Sea.

That was in 2010.

Fearing that its high-tech industries could be compromised, the Japanese decided to invest in Mount Weld–  a mountain and a mine site in Western Australia, with one of the richest major rare-earth deposits in the world.

Backed by funding by the Japanese government, Sojitz, a Japanese rading company, signed a $250 million supply deal for rare earths mined at the site.

The agreement also helped the Australian firm Lynas, to fund construction of a processing plant in Kuantan, Malaysia. Recently, Lynas  has signed a 10-year loan extension on easier terms with its powerful Japanese consortium. With the loan repayment extended to 2030, the company will be able to relocate its controversial processing facility from Malaysia to western Australia, not far from the Mount Weld mine.

With critical dependence on China no longer acceptable, the Indo-Pacific countries have decided to work together to establish their own dedicated supply chains, free from Beijing’s influence.

In September trade ministers of Japan, India and Australia agreed to hammer out details of a new supply chain network. They have also invited other countries in the region with shared views to join the initiative. The three ministers agreed to reach out to ASEAN countries as the next step to substantiate the free-from-Beijing initiative.