![]() However, it would have to go into any such commitment with its eyes open to the possibility of losses to the taxpayer - rare earths have often been in over-supply with poor prices. The government has already used that account to establish A$3.8 billion facility to support its military equipment export program. The Commonwealth, rather than the agency, would assume responsibility for any losses. The Australian government could, at a stretch, use the “national interest account” at Export Finance Australia to assist. Neither banks nor equity markets will finance them. Australia has at least half a dozen rare earth projects ready for development but needing commitments from potential customers and financiers. The Australian government is considering its response to the US push for non-Chinese sources of supply. The president has committed to provide financial assistance under the Defense Production Act, although the sums advanced under this are typically too modest to support a resource project development. The United States has preferred to leave it to the market but given the intensity of the trade war, the Trump administration has resolved that it is a national security priority to eliminate the dependence of the US military on Chinese supplies of critical minerals, particularly rare earths and derivative products. ![]() Australia’s Lynas, which now accounts for 8 per cent of global rare earth production, was a key beneficiary, with Japanese government funding supporting its development. The Japanese government decided in 2010 that these risks justified government intervention. Given the intensity of the US-China trade war, the Trump administration has resolved that it is a national security priority to eliminate the dependence of the US military on Chinese supplies of critical minerals, particularly rare earths and derivative products. Also, any investor in a non-Chinese rare earth project must make a calculation about the response from its giant Chinese competitors. There are no transparent prices, separating the elements out of the host rock is technically difficult, often yielding radioactive waste, and the applications for rare earths are subject to unpredictable technological change. While rare earths have lots of promise, with the shift to electric cars and the continuing rollout of wind farms driving demand, there are good reasons why it has been hard to get rare earth projects developed. Total sales took a decade to recover, and for some rare earth elements, the damage has been permanent as substitutes have been found. China’s rare earths companies are aware of the risks of pushing prices too high, because they’ve done it before in 2010. It is not in China’s interests to impose an embargo - the result would be the stimulation of competitive rare earths production and substitution. China is responsible for between 80 and 90 per cent of processed rare earths and products such as powerful rare earth magnets. ![]() Chinese authorities have hinted that they may use their dominant position as a supplier of rare earths and associated manufactured goods to retaliate against US restrictions on high technology exports to China. ![]()
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