China controls 70% of rare earth processing. Australia must act

Rare earth elements are 17 metals that sit at the heart of modern technology. They power the magnets in electric vehicle motors, the screens on your phone, defence radar systems, and wind turbines. Yet most Australians have never heard of them, and almost no rare earths are processed here despite Australia holding some of the world's richest deposits. Understanding this supply chain matters because it touches your cost of living, Australia's economic future, and our strategic independence.

What rare earths actually are and why they matter

Rare earth elements are not scarce in absolute terms. They are moderately abundant in Earth's crust. What makes them rare is that they are dispersed and expensive to extract and refine. The 17 metals have exotic names like neodymium, dysprosium, and cerium. Each has specific properties: some create powerful permanent magnets, others glow under ultraviolet light, others are essential catalysts in chemical reactions.

A single electric vehicle motor contains kilograms of rare earth magnets. A modern military jet's targeting systems depend on rare earth phosphors. A wind turbine generator uses permanent magnet technology that relies on rare earths. Without them, the global energy transition and modern defence capabilities simply cannot proceed.

Why China controls the processing chain

China produces roughly 60 per cent of the world's rare earth ore, but it controls roughly 85 per cent of global refining and processing. That gap is the critical vulnerability. Australia's Lynas Rare Earths operates the world's largest rare earth mine near Greenwood in Western Australia, yet the ore is shipped to Malaysia for initial processing before some material returns for further refinement.

China's dominance emerged over decades through heavy capital investment and willingness to absorb environmental costs that other nations rejected. Processing rare earths generates toxic waste and uses strong acids. Western countries decided in the 1980s and 1990s that those environmental costs were too high to bear domestically and outsourced the industry. Once China controlled processing, strategic leverage followed.

The security and economic risk

In 2010, China briefly restricted rare earth exports during a trade dispute with Japan, exposing how dependent the world had become. That shock prompted the United States, Japan, and the European Union to invest in alternative supply chains and domestic processing. Australia is now central to those efforts.

The Australian government has recognised rare earths as a critical vulnerability. New processing capacity is being developed in Perth and Queensland. The cost of separating and refining rare earths domestically is significantly higher than in China, but strategic independence has become valuable. Supply chain resilience now competes with pure cost efficiency in policy decisions across allied nations.

What it means for Australia

Australia sits on a rare earth opportunity and a rare earth risk. The opportunity is substantial: demand for rare earths will grow for decades as electric vehicles, renewable energy, and advanced defence systems proliferate globally. An expanded domestic processing industry could employ thousands and create long-term export revenue.

The risk is equally real. If Australia increases rare earth mining but continues to rely on offshore processing, we are simply moving the strategic bottleneck elsewhere. If we invest in domestic processing capacity but demand growth fails to materialise, we carry stranded assets. The challenge requires coordination between private investment, government policy, and allied partnerships to distribute risk and reward across the supply chain.

The bottom line

Rare earth elements are invisible to most people but essential to almost everything modern. China's control over processing, not ore extraction, gives it leverage over global technology and defence industries. Australia's rare earth deposits and growing processing capacity position us as a potential alternative supply source. Whether that potential translates into genuine strategic and economic benefit depends on whether Australia can build processing infrastructure that is competitive enough to attract investment, reliable enough to win the trust of allied governments and technology companies, and resilient enough to survive future trade or security disruptions. The next decade will determine whether rare earths become an Australian asset or simply another commodity we dig up and ship offshore.

This article was compiled by AI and screened before publishing. See our editorial standards.