July 14, 2011
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An activist protests outside the Lynas Corprations headquarters in Sydney.
An activist protests outside the Lynas Corprations headquarters in Sydney. Photo: AFP
Australia has a key role in the push to secure supply in the lucrative world of rare elements.
WHEN a Chinese trawler fishing in disputed waters collided with Japanese coastguard patrol boats early on September 7, the global supply of rare earths – crucial for producing smartphones, flatscreen televisions, hybrid cars and iPads – was plunged into turmoil, even if it was not immediately apparent.
And Australia’s crucial role in the lucrative trade was also to be thrust firmly into the international spotlight.
The errant vessel’s skipper was arrested and detained, calls for his release went unheeded, and a diplomatic row, seeded by a long-standing territorial feud, erupted between the two Asian nations. For two weeks, tensions worsened with no resolution in sight – until China decided to hit Japan where it hurt.
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Lynas executive chairman Nicholas Curtis at a recent press conference in Kuala Lumpur.
Lynas executive chairman Nicholas Curtis at a recent press conference in Kuala Lumpur. Photo: Vincent Thian
On September 22, Chinese Premier Wen Jiabao banned rare-earth exports to Japan, and threatened ”further action” if the fisherman was not released. Two days later, the man was set free.
”In order to further grow our mutually beneficial relationship based on strategic interests, I believe it is necessary for Japan and China to handle matters calmly,” Japanese Prime Minister Naoto Kan said at the time.
The export ban was swiftly revoked, but the world had received a nasty wake-up call. China has a stranglehold on the rare-earths market, accounting for 97 per cent of worldwide production. And it was clear it was prepared to use that dominance for political, as well as economic, gain.
Recycling rare earth magnets inside hard drives in Matsudo, Japan.
Recycling rare earth magnets inside hard drives in Matsudo, Japan. Photo: AP
Japan, in particular, had to find alternative sources of rare earths, or risk whole industries being affected.
New applications for rare earths are being discovered all the time. The 17 closely related elements have remarkable magnetivity and help make phones smaller, TVs bigger and display panels brighter. They also represent our best-known chance to make energy-efficient technologies, such as electric vehicles, wind turbines and solar cells financially viable.
”We are as addicted to rare earths as we are to oil, we just don’t know it,” says Nicholas Curtis, chief executive of Australian rare-earths miner Lynas Corporation.
Even before the diplomatic incident, China had begun to restrict exports of rare earths, to ensure it could meet the demand from its local industry. Shipments have been cut from 67,500 tonnes in 2005 to 30,250 tonnes last year. With prices of some rare earths having soared up to five times since the start of the year, the worldwide race to break China’s stranglehold is officially on. ”I think the situation has become more acute more rapidly than anybody would have ever predicted,” Curtis says. ”The crisis in the supply of rare earths in the last year or so has resulted from a combination of events that came together and created this perfect storm – and that focused policymakers very heavily on the strategic implications on rare earths.”
With California-based Molycorp also in the mix, Australia’s Lynas is widely considered to be leading the pack. Much like Andrew Forrest’s Fortescue Metals in its infancy, Lynas has rocketed from a penny-dreadful stock to a company worth $3 billion almost on expectation alone – it has yet to start production.
China’s dominance in producing rare earths stems from the 1980s when statesman Deng Xiaoping recognised the potential in the obscure elements (including a possible role in the development of nuclear weapons) and threw massive resources behind their research. Playing catch-up has been an arduous process.
”It’s a specialty chemical industry, mining is one small part of a very much larger picture,” says Steve Ward, chief executive of rival Arafura Resources, which hopes to become the third major non-Chinese player when its Whyalla processing plant is complete.
The complexity with rare earths isn’t in finding a bountiful deposit or figuring out how to dig them out of the ground. Processing the ore into a useable form is the hard part, particularly because of the hazardous acids and chemicals involved and the radioactive waste it produces. It is the engineering design, environmental safeguards and government approvals that take years to achieve.
After 10 years’ work, Lynas expects to start producing as early as next year. When in full production, it can produce a sixth of the world’s rare earths.
Backed by a Japanese government that has committed ¥19.7 billion ($A230 million) to secure rare-earth supplies outside China, commodities trader Sojitz became one of Lynas’s cornerstone investment partners late last year.
Last week, German giant Siemens also announced its intent to form a long-term partnership with Lynas, effectively guaranteeing its rare earth supply.
Yet with the world watching, Lynas’s world-beating hopes are at risk of being left at sea by being caught in a political maelstrom of its own.
ROADBLOCKS and barbed wire lining the streets of Kuala Lumpur failed to stop an estimated 50,000 protesters from marching through Malaysia’s capital on Saturday, demanding fairer and more transparent election laws ahead of a poll expected in the middle of next year.
Police fired tear-gas and arrested more than 1400 of the opposition-backed protesters, who claim Malaysia’s ruling National Front party relies on electoral fraud to cling to power.
It is becoming a familiar trend. Inspired by the real prospect of political change, the voices of dissent previously unheard in the government-controlled media are making a real impact through social media and online blogs.
With momentum shifting strongly since the last election, the National Front faces a real danger of losing the next poll, expected to be mid-next year, having held power since the country’s independence in 1957.
It is against this political backdrop that Lynas is trying to build the world’s largest rare-earths refinery plant in Kuantan, capital of the central Malaysian state of Pahang. The company’s success hinges heavily on the plant – all its rare earth ore concentrate will be processed and exported from the facility.
But for Lynas, the plant’s construction has become a hotly contested political football. And a change in government could spell big trouble.
Local Kuantan MP Fuziah Salleh, a member of the opposition People’s Pact alliance, has attracted fervent support for her aggressive campaigns against the plant’s construction.
The genial grandmother of six has questioned the government’s decision to award a 12-year tax exemption to a foreign company that would ship its profits offshore and leave the town saddled with “tonnes and tonnes” of radioactive waste.
Protesters have held weekly demonstrations in Kuantan since March, increasingly fearful and infuriated by the threat the plant poses to the health of residents and their fishing and tourism industries.
Things took an ugly turn last month when two makeshift petrol bombs were thrown into the residence of Lynas construction manager Bill Morris and ”Go Back To Australia, Lynas” was painted on his front gate. Morris was unhurt.
The New York Times has chimed in with an article containing damaging allegations of Lynas contractors cutting corners, citing local whistleblowers concerned over building practices at the plant and potential leaks in concrete tanks holding hazardous materials.
“Maybe it does reflect the political interest in rare earths but I haven’t seen many other plants in the world where during construction a front-page New York Times article is written about whether the concrete in 11 leachate tanks is porous or not,” Curtis notes wryly.
“It’s dramatising what is a normal construction process – in every construction program there are issues.”
A dozen Malaysian protesters even took their fight all the way to Australia last week, funding a week-long trip to picket Lynas’s head office in Sydney and lobby government officials in Canberra. ”It just demonstrates how determined we are to get rid of Lynas from Malaysian shores,” says protest organiser Lee Boon Teet.
The relentless political pressure had forced the government to ask the International Atomic Energy Agency to conduct an independent review, the results of which were released two weeks ago. The agency found no breaches of international safety standards but made 11 recommendations, including that Lynas outline its detailed plans for the permanent storage of 840,000 tonnes of radioactive waste.
Curtis has admitted error in not properly consulting the people of Kuantan earlier, but insisted the plant would be “absolutely safe”. He also quickly moved to quell any fears of lengthy delays, insisting it would satisfy the IAEA’s recommendations by year end.
But Fuziah says it is hypocritical of Curtis to suggest Lynas would consult communities more closely while pushing to complete the plant.
”For Lynas to say that they will get it done by the end of the year is such an arrogant statement,” she says.
Fronting international media in Kuala Lumpur following the release of the IAEA report, Curtis bristled at suggestions the political situation could cause further delays.
”I’m not here to comment on the political situation in Malaysia,” he said. ”We’ve been very clear that we believe we will be commissioning the plant by the end of 2011.” Curtis says he sees no scenario in which Malaysia could prevent the plant being built if it satisfies all safety requirements.
”You don’t change the rules on companies that have already invested and hope to keep your status as a suitable destination for foreign investment,” he says.
Fuziah denies she is campaigning against the plant in a mudslinging match against the government. ”I stand firm by what I’m saying because I believe my stand is right,” she says.
Read more: http://www.smh.com.au/business/the-global-race-is-on-for-rare-earths-and-lynas-20110713-1hdyc.html#ixzz1S5FoFpof