Rare earth ‘gold rush’ extracts a price

Riot squad teams were on alert and rush-hour traffic was brought to a standstill in Kuala Lumpur late last week as hundreds of demonstrators descended on the Australian high commission.

The crowd chanted, waved placards, wore black T-shirts bearing slogans such as ”Save Malaysia”, ”No Radiation”, ”Go back to Australia” and, most pertinently, ”Put the Planet before the Earths”.

Rare earths, that is; elements crucial to the manufacture of high-tech products from iPods to eco-friendly light globes, wind turbines to weaponry, smartphones to electric cars.

They were protesting against plans by the Sydney company Lynas Corporation to process rare earths mined at Mount Weld, in Western Australia, at a new plant near Kuantan, in Pahang state on Malaysia’s east coast.

In an eerie echo of the debate over the processing of asylum seekers in Malaysia, MP Fuziah Salleh accused Lynas of adopting double standards.

”Lynas isn’t able to comply [with environmental standards] in Australia,” she said. ”It’s taking advantage of loopholes in Malaysian laws.”

The company denies the claims.

It said the location of the $230 million plant had nothing to do with operating standards. Labour costs were a factor, but Malaysia was chosen primarily for its local know-how, industrial infrastructure, energy supplies and port facilities.

”The plant meets all safety and environmental standards for Malaysia as well as Australian and international standards.” Indeed, Lynas says the project passed licensing requirements for Australia and China.

The project – due to start production later this year from stockpiled Mount Weld ore – is being watched carefully, for it is the first move in a worldwide drive to increase supplies of rare earths.

Elsewhere, production is expected to resume soon in the United States, after being abandoned in 2002, and be increased in countries such as India, Vietnam, Russia and China, the world’s biggest supplier.

Michel Nestour, a minerals specialist for the professional services firm Ernst & Young, recently listed more than 20 other prospects, including four in Australia, which has about 1.4 per cent of world reserves. As he says, ”The rare earths race is on.”

For good reason. Sales of rare earths have quadrupled since 2003, as their unique properties, such as being magnetic and phosphorescent, are sought to underpin key social trends and realise sustainable, clean-tech objectives, says Lynas.

Such is their crucial role in supporting future energy-efficiency initiatives, reducing greenhouse gases and speeding the miniaturisation of digital technology that prices for this ”21st-century gold” have sky-rocketed.

Price movements vary. But in seven years the price of a kilogram of dysprosium oxide, used in iPods and data storage applications, wind turbines and hybrid vehicles, has risen from $US14.33 to $US700.

Annual sales of rare earths remain small, about $2 billion this year, but a supply squeeze has long been predicted by experts, concerned by political and public ignorance about their significance.

As Byron King, an online metals watcher, explained, the world is addicted as much to the earths as to oil. ”None of these elements is famous like gold or silver. None is shipped in giant ore freighters. But without them, much of modern economy will just plain shut down.”

Exaggeration? Perhaps. But there is another compelling, strategic reason why ”Western nations” are anxious to secure supplies of elements that are generally not radioactive, but are found in association with others that are.

Remarkably, China has secured more than 95 per cent of the market. Indeed, it is reportedly the only source of dysprosium, which appropriately takes its name from the Latin dysprositos, meaning ”hard to get at”.

A recent report by the American Security Project think-tank warned that, by way of rare earths, the US was ”completely reliant on China for production of some of the [Pentagon’s] most powerful weapons”.

Though China denies exploiting its market position, it has created stockpiles, is seeking overseas involvement in companies such as Lynas and operates an export quota system, comparable to that used by the OPEC oil cartel.

Little wonder, then, that the rest of the planet feels vulnerable, frets increasingly about its dependence on a monopoly supplier for products which, as many commentators point out, are rare in name, not in nature.

In fact, though it dominates the world market, both as a supplier and as a consumer, China has only about 30 per cent of estimated world reserves of the 17 different rare earths identified by the US Geological Survey.

As The Economist magazine put it, though abundant in the Earth’s crust, extracting earths individually from a ”cocktail” of earths within ores, sands and clays is – at any price – ”a difficult, time-consuming, costly and dirty business”.

Until recently, at least, China’s pre-eminence in the business has been built on cheap labour and, according to critics, minimal health, safety and environmental precautions.

China has now moved to impose stricter standards, and cracked down on illegal mining and smuggling, but the social, health and environmental legacy of existing projects is horrific.

Former Herald journalist Allison Jackson, who works for Agence France-Presse in Beijing, recently visited the epicentre of world rare earth production near the Inner Mongolian city of Baotou.

Once farmland, it is now a disaster area, dotted with toxic waste dumps and reservoirs of radioactive water. ”People are suffering severely,” said the National Business Daily, pointing to a rise in cancer-related deaths.

It is a nightmarish scenario familiar to Malaysian opponents of the Lynas project, who fear there could be a repetition of the health problems linked to a Japanese rare earths refinery at Bukit Merah, in Perak state.

The plant closed in 1992 following claims it caused birth defects and leukaemia among local residents. According to one critic, it remains ”one of Asia’s largest radioactive waste clean-up sites”.

Lynas remains confident of getting the go-ahead, but much will depend on the findings of an independent panel of nine experts, due to arrive in Kuala Lumpur tomorrow.

The Trade Minister, Mustapa Mohamed, insists the team, nominated by the International Atomic Energy Agency, will assess the plant’s compliance with international safety standards and world’s best practice.

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