Can Australia provide US with rare-earth metals which China has restricted?

Australia may have spotted a lucrative hole in the market for rare-earth metals, which are crucial for the defence industry and for manufacturing products necessary for the development of artificial intelligence (AI), such as semiconductors.

Last week, China, which has a stranglehold on the supply of these critical minerals, tightened its export controls^[1] over its rare-earth metals. It now restricts exports of 12 of the 17 rare-earth metals on the periodic table. Seventy percent of rare earths are mined in China, and 90 percent are processed there.

The United States is among many nations that urgently require these materials, and analysts have suggested that China is using access to them as leverage for its ongoing trade talks with the US. The announcement of the new restrictions came just weeks ahead of an expected meeting^[2] between Donald Trump and his Chinese counterpart, Xi Jinping, later this month.

But on Thursday, Australia appeared to be stepping into the breach, when Canberra’s Treasurer Jim Chalmers told reporters in Washington that “Australia is very well placed” to service the global need for rare earths instead.

“We will engage with our partners to make sure that we can be a very reliable supplier to meet the critical minerals needs of … the US and other markets,” he said, ahead of talks with Kevin Hassett, the director of the US National Economic Council.

On September 24, Australia’s trade minister, Don Farrell, met his US counterpart, Jamieson Greer, in Malaysia. According to ABC news, Farrell asked Greer, “How can we help America become great again?”

“Give us your critical minerals,” the US trade representative responded. Shortly afterwards, the White House confirmed that US President Donald Trump would meet Australian Prime Minister Anthony Albanese in the Oval Office on October 20.

Critical minerals look set to be an important talking point.

There are 17 rare earth metals – 15 lanthanides (metallic elements), as well as scandium and yttrium. They are vital for manufacturing magnets used in advanced technologies, from electric cars and semiconductors to modern military equipment.

Hayley Channer, director of the Sydney-based US Studies Centre (USSC) think tank, described next week’s meeting between Trump and Albanese as “critical”.

She told ABC News that the US has, for some time, been concerned about “Australian minerals always going through China”. For instance, “90 percent of Australia’s lithium goes to China for processing”, she said.

There is a good reason for that. Analysts and policymakers widely acknowledge that China has nurtured a vast pool talent – at universities and state-owned enterprises – in processing rare-earth minerals. Meanwhile, its research and development network is years ahead of other countries.

Canberra seems set on redressing the balance, however. Before this year’s parliamentary elections in May, Albanese announced plans for a $1.2bn critical minerals reserve to help develop the Australian sector, with a focus on processing techniques.

Which rare minerals does Australia have?

While Australia is home to some of the world’s most important rare-earth metals – like neodymium, which is used in magnets for wind turbines – its critical mineral reserves are roughly one-seventh the size of China’s, according to the US Geological Survey.

Still, some deals have been already struck. On October 8, the US firm Noveon Magnetics partnered with Lynas Rare Earths, Australia’s largest rare earths company, to supply magnets to US defence companies. The announcement sent Lynas’s share price to a 14-year high.

Last week, Beijing tightened export controls over its rare earths by adding five new metals (holmium, erbium, thulium, europium and ytterbium) to an existing list of seven, bringing the total number of metals under restrictions to 12.

In the future, foreign companies will have to obtain special approvals from China’s Commerce Ministry before they can buy rare-earth magnets and certain semiconductor materials that have at least 0.1 percent heavy rare-earth metals from China. To obtain these permits, they will have to detail exactly what the rare-earth metals or products will be used for.

China cited national security interests as the reason for these new restrictions.

“Rare-earth-related items have dual-use properties for both civilian and military applications. Implementing export controls on them is an international practice,” a Chinese Commerce Ministry spokesperson told reporters when the most recent restrictions were announced.

China has also placed limits on the export of specialist technological equipment used to refine these rare-earth metals. Most of these provisions will come into effect on December 1.

How has the US responded to China’s restrictions?

Donald Trump has threatened to impose an additional 100 percent tariff^[3] on Chinese exports from November 1. He said his decision was in retaliation to Beijing’s “very hostile” moves.

Trump’s announcement would bring tariffs on many Chinese goods to 130 percent. That would be a bit below the 145 percent level imposed earlier this year, before both countries ratcheted down their respective levies in May^[4] to allow time for trade talks.

But the latest spat over rare earths has raised the prospect of relighting the hazardous trade war between the world’s two largest economies.

In an interview with Fox Business on October 13, US Treasury Secretary Scott Bessent said: “This is China versus the world. They have pointed a bazooka at the supply chains and the industrial base of the entire free world, and we’re not going to have it.”

How are US-Australian relations?

During the Biden years, a “Critical Minerals Taskforce” was established between the US and Australia. However, economic relations between the two nations became strained earlier this year, when Trump imposed a 10 percent blanket tariff on most Australian exports.

Elsewhere, Australia’s relatively low level of expenditure as part of a trilateral security pact with the UK and US (known AUKUS) has come into question. Canberra spends roughly 2 percent of its GDP on defence, well short of the 3.5 percent target that Trump has called for from US allies.

Washington launched a review^[5] of the pact earlier this year, questioning if it aligns with “America First” priorities by diverting US military assets. The review is being led by Elbridge Colby, the under secretary of defence for policy, who has previously expressed scepticism about AUKUS.

That said, Albanese and Trump have a seemingly cordial relationship. Following his election in May, Albanese received a congratulatory phone call^[6] from the US president, and described their conversation as “very warm” and “constructive”.

For his part, Trump has called Albanese “very nice” and “very respectful”, stating, “I can only say that he’s been very good and a friend of mine.”

Which other countries is Trump trying to court for rare-earth minerals?

Since returning to office, President Trump has pursued several critical-minerals deals aimed at reducing US supply-chain dependence on China.

In Ukraine^[7], Washington struck a minerals-for-reconstruction pact in April, granting US firms’ preferential access to rare earths and energy resources in exchange for investment once the war with Russia is over.

Meanwhile, ongoing talks with the Democratic Republic of the Congo^[8] are focused on cobalt and lithium extraction, with the US offering security guarantees in return for mining rights.

The US and Pakistan^[9] signed a $500m memorandum of understanding in September, under which the United States pledged to build a poly-metallic refinery and develop rare-earth deposits.

Together, these efforts reflect Trump’s transactional approach to resource diplomacy – linking security and technology with strategic minerals. Australia may well be next in line, analysts say.