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Malaysia plant threatens China grip on rare earths
by Staff Writers
Gebeng, Malaysia (AFP) Feb 5, 2012

China's chokehold on the rare earths vital for everything from iPods to missiles is widely expected to end soon, thanks in large part to a contentious new plant in Malaysia.

Australian miner Lynas won a license Wednesday to begin processing rare earths imported from Australia at the plant -- which is nearly completed -- despite fierce resistance over environmental and radiation concerns.

Analysts said the Lynas Advanced Materials Plant (LAMP) in eastern Pahang state will be at the vanguard of a world output surge that will break a Chinese stranglehold that has crimped supply and sent prices soaring in recent years.

The plant will be able to process an initial 11,000 tonnes of rare earths per year -- about a third of current world demand excluding China -- once output begins in the middle of the year, and eventually 22,000 tonnes annually, Lynas says.

That, plus other new sources and increased output by existing producers, will lead to a 10-fold increase in non-Chinese output to 60,000 tonnes by 2016, said Dudley Kingsnorth, a rare earths expert with Industrial Minerals Company of Australia.

The result being a world surplus as in that year demand outside China should be about 55,000 tonnes, he added.

"A ten-fold increase in five years is a huge increase for rare earths," said Kingsnorth, who added the Lynas facility is the first new plant of its kind outside China in a quarter of a century.

China, with its rich reserves and greater ability to face down public environmental concerns, has come to dominate the market, currently meeting about 95 percent of world demand.

But its imposition of export quotas and other production restrictions aimed at tightening its control on the valuable resources have sent prices rocketing and fuelled a world push to find other sources.

Growing demand means the world simply must explore and develop these new sources, Lynas chief operating officer Eric Noyrez told AFP in an interview on the plant construction site, a three-hour drive from the capital Kuala Lumpur.

"Certainly, the sustainable supply of rare earths is a key component of the economy in any country. It's just like if the food industry suddenly had no vitamins. It probably would be in a very bad shape," Noyrez said.

But the controversy in Malaysia over the plant has illustrated the continued challenges in increasing output of rare earths, 17 elements critical to everything from a range of consumer goods to missiles.

Malaysia's government sees LAMP as part of a drive to bring high-tech industries to rural areas, but residents fear radioactive waste could pose a health threat.

"People are worried it may leak radioactive material into the environment and end up on their dinner table," said Tan Bun Teet, a local retiree and chairman of Save Malaysia, Stop Lynas, a pressure group formed by local residents.

He said the group planned to file a court challenge.

Local resident Sharimila Vino said health fears outweigh any employment or economic gains and that some residents were moving away from the area.

"I'm planning to get pregnant in five years. I'm thinking to myself, is it safe? What if something happens to me, to my baby?" said the 35-year-old.

Opponents point to a similar rare earths plant built by Japan's Mitsubishi Corp in the 1980s in Malaysia's northern Perak state. It was shut in 1992 over protests from residents who blamed it for birth defects in nearby populations.

Opponents accuse Lynas -- which won a 10-year tax break for the project -- of choosing Malaysia to avoid controversy at home.

Lynas, which will process rare earths from its Mount Weld mine in Australia, denies that, citing economic factors.

With elections expected this year, Malaysia's government has scrutinised the process closely, causing Lynas to fall months behind schedule and costs to soar.

Malaysian authorities say they still could revoke the licence if Lynas fails to come up with a long-term plan for managing waste. Lynas insists it will do so.

But activists also worry a rare earth supply surge could send prices falling. Plants like LAMP would shut, leaving locals with toxic dump sites, they say.

John Mothersole, a senior economist who tracks the rare earths market for IHS Global Insight, said that scenario was probably unlikely, but admitted it would take time before the market finds balance.

"I think this is a market that is searching for an equilibrium. The (project) in Malaysia is the first step of this process," he said.


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