- China proposes sharing rare earth tech with Malaysia for access to untapped reserves, countering Lynas.
- Proposed refinery to process light and heavy rare earths amid global supply chain disruptions.
- Project hurdles include raw material supply, environmental concerns, and multi-level regulatory approvals.
China and Malaysia are engaged in preliminary discussions to establish a rare earths processing refinery in the Southeast Asian country, marking a potential shift in Beijing's longstanding policy of safeguarding its refining technology.
Malaysia's sovereign wealth fund, Khazanah Nasional, is poised to collaborate with a Chinese state-owned enterprise on this project. This partnership would involve China sharing its advanced processing expertise in exchange for access to Malaysia's substantial untapped rare earth reserves, aiming to curb the influence of Australian competitor Lynas Rare Earths, which already operates a facility in Pahang state.
Rare earth elements are essential for manufacturing high-tech products, including electric vehicles, smartphones, and defense equipment. They are categorized into light and heavy types, with heavy rare earths being rarer and critical for clean energy technologies. Global demand has surged, prompting manufacturers to seek diversified supplies, especially after China imposed export restrictions earlier this year, disrupting production for automakers and magnet makers.
Malaysia boasts an estimated 16.1 million metric tons of rare earth deposits but lacks the necessary technology for extraction and refining. To preserve its resources, the country has prohibited the export of unprocessed rare earths, with a single exception granted in 2022 for a pilot mining initiative to establish national guidelines.
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The refinery suggested would process both light and heavy rare earths making Malaysia a major player in the market. In August, Malaysian Natural Resources Minister Johari Abdul Ghani said that China has agreed to provide technical assistance, although President Xi Jinping has made it clear that collaboration should be done with only state-linked organizations in order to preserve proprietary knowledge.
However, the initiative faces significant obstacles. Sources indicate China's concerns over Malaysia's ability to provide sufficient raw materials for the plant's operations. Additionally, environmental risks and regulatory approvals pose challenges, as mining requires clearances from both federal and state authorities. Malaysia has explicitly opposed extraction in ecologically sensitive areas like forests and water catchments. Khazanah's Chief Investment Officer, Hisham Hamdan, described the exploration as nascent, emphasizing it's part of broader industry studies to assist the government.