Malaysia’s goal of capitalizing on its rare earth reserves, valued at approximately $50 billion, is encountering significant hurdles, according to a government minister. Plans to establish a domestic supply chain for these minerals are complicated by reliance on Chinese technology and the potential for a US boycott due to geopolitical factors.
Prime Minister Anwar Ibrahim announced last year that Malaysia aims to secure a larger share of the global rare earths market following the discovery of substantial untapped reserves, estimated at 16.2 million tonnes, located in the states of Perak, Pahang, Kedah, Kelantan and Terengganu.
Rare earth elements like neodymium and samarium are critical for green technologies, including the magnets used in electric vehicles, wind turbines and smartphones. However, the ongoing US-China tech rivalry presents unique challenges for Malaysia, as local officials seek to control the mining, processing and exportation of these resources.
“There have been some hurdles. One is the geopolitical aspect [of the industry],” stated Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad. He noted that unlike other sectors, the rare earths industry is more sensitive and complex, making cooperation more challenging.
Since 2018, the US and its Western allies have imposed various sanctions and tariffs on China to counter its economic and geopolitical influence, stemming from accusations of unfair practices and technology theft. Nevertheless, Western economies remain heavily reliant on China for rare earth supplies, with China producing 240,000 metric tonnes in 2023—over five times the output of the US, the second-largest producer. Additionally, about 90% of global rare earth processing occurs in China.
To enhance its value chain, Malaysia aims to create an end-to-end supply chain that allows mined ores to be processed domestically into finished products, such as super magnets. In a bid to attract investment, Anwar announced a complete ban on the export of raw rare earth ores.
However, the choice of partners will significantly influence Malaysia’s ability to sell its processed rare earth products. “In processing and mining, much of the technology is held by China, making them the most competitive,” Nik Nazmi explained. He cautioned that using Chinese technology could limit Malaysia’s trade options, as Beijing requires that any mining by Chinese firms be processed in China.
In light of these geopolitical constraints, Malaysia is adjusting its policies while prioritizing sustainability in the rare earth sector. The country launched a pilot mine in Perak in collaboration with a Chinese firm and proposed that Australian mining giant Lynas process rare earth metals sourced from Malaysia.
Malaysia is actively engaging with various countries, including Australia, the US, and China, as well as potential partners in Japan and South Korea, to develop its rare earth industry, which is estimated to be worth around 200 billion ringgit ($49.7 billion). Nik Nazmi plans to visit Nanning, China, in early 2025 to discuss the possibility of securing an exemption from China’s requirement that raw ores be processed domestically.
Finally, he emphasized the importance of incorporating sustainability and environmental protection into Malaysia’s rare earths strategy, stating, “If we do not do it well, we won’t be able to sell it. There will be a lot of scrutiny regarding how sustainable rare earth mining is.”
