Malaysia flexes rare earth muscle as mineral-hungry US seeks non-Chinese sources

Malaysia’s ban on exports of unprocessed rare earth metals this week signals that the Southeast Asian country has a realistic shot – on its own terms – at feeding the mineral-hungry United States amid its strained trade ties with the world’s dominant supplier, China, according to analysts.

Kuala Lumpur will bar exports of unprocessed rare earth minerals, which are globally prized raw materials used in a range of electronic hardware, to keep supplies onshore for investment in downstream industries, a Malaysian official said this week.

The country’s minister of investment, trade and industry, Tengku Zafrul Abdul Aziz, told the Malay Mail news outlet that foreign investors could jump into the downstream Malaysian rare earths sector if their projects involve local mineral processing, job creation and technology transfers. The processed rare earth metals could be exported.

While many countries sit on rare earth reserves, analysts say Malaysia’s industry is likely to take off because it already has processing capacity, and because US buyers of rare earth metals are scrambling for non-Chinese sources.

“Malaysia’s existing capabilities give it a head start in integrating into global supply chains,” said Qarrem Kassim, an analyst at the Institute of Strategic & International Studies Kuala Lumpur.

“Applying this export ban equally to all sides is a signal that Malaysia is willing to exercise its geoeconomic agency to prioritise its own development needs,” he said. “This may result in potential foreign investment down the road.”

The Southeast Asian country’s Ministry of Natural Resources and Environmental Sustainability had said in a “business model” last year that it would “delve into” mining for heavy rare earth metals that are essential components in everyday devices such as smartphones and computers, as well as in technologies such as electric vehicles and solar panels.

Officials have advanced that ambition this year by laying plans for two more processing plants, the Malaysian national Applied Research and Development Centre’s technology advisory head, Nordin Ramli, said this month on his LinkedIn page.