Source By Murray Hunter

BANGKOK, Thailand: The Madani government is interested in developing Rare Earth Element (REE) extraction in Malaysia, especially the non-radioactive rare earth elements (NR-REE).

The policy is aimed at facilitating Malaysia to become a major producer moving far beyond extraction to mid-stream and downstream processing ores into magnets (‘mine-to-magnet’) and other materials.

This is based upon the National Mineral Industry Transformation Policy (2021-2025) developed by the former administration.

Although interest in processed REE is based on positive market forecasts for EVs, electronics, and sustainable energy production, where forecasts expect the REE market to be in excess of USD 6.26 billion by 2030, this requires the market almost doubling in size from a base of USD 3.95 billion in 2024, over the next 5 years. This figure requires further scrutiny.

Production volumes are not rising, higher prices are the major reason why the size of the global market is seen to be growing. In fact, some figures indicate annual production volumes are actually decreasing.

China currently dominates the global REE market producing 60 percent of mining output and 90 percent of refined products.

China has restricted exports over the last 18 months, primarily in response to national security issues, and as a response to the current trade war with the U.S.

The aggregate global supply of REE strongly correlates with the state of China-US trade tensions, rather than production capacities. Any positive trade moves between China and the U.S. could greatly increase supply and lower prices.

The United States has been seeking REE agreements with a number of nations. Over the last month, the U.S. has signed REE supply agreements with Australia, Cambodia, Thailand, Vietnam, Ukraine, Japan, as well as Malaysia.

The U.S. rationale is to degree reliance upon China, where the U.S. obtains 70 percent of its needs, and widen potential sources to put pressure on Chinese “price floors”.

On October 20, at a signing ceremony with Australia in the White House, U.S. president Donald Trump said he wants to see REEs to be worth USD 2 per kilogram in the near future.

The U.S. clearly aims to build up supply of REE and lower prices in the long-term. The current prices of neodymium-praseodymium oxide trades around $60–$110/kg under U.S. government-backed floors.

However, the most critical factor influencing price and supply of REE, at least in the short-term will be what China does.

This creates some major concerns about the financial viability of mining, leaching, and processing into products in Malaysia. The costs of land preparation are high, as would be mining leaching and processing.

Any fall in the prices of REE could render any sunrise REE industry uncompetitive immediately.

Should China want to eliminate potential competitors, it will simply lower prices to put competing REE industries out of business. This is a major risk factor for any future Malaysian producers.

Malaysia aims to attract RM 100 billion in investment and acquire the technologies required to process and manufacture REE products like magnets.

Malaysia wants to obtain 12-15 percent of the global supply of REE which on current market size (USD 3.9 billion) would equate to RM 4.5 to 4.9 billion per annum.

Its difficult to see how the return of investment could be attractive enough for private investors.

The negative externalities of REE production in Malaysia

Malaysia’s Environmental, Social and Governance (ESG) policy was launched on October 2, 2023. REE will never meet the criteria of being a sustainable economic activity.

The deep holes from tin mining a century ago still scar Malay landscape.

It is believed the discoloring of the Sungai Perak (Perak River) was the result of REE leaching. Radio active material around Bukit Merah after REE extraction still exists.

There is a worry by some NGOs that permanent Forest Reserves (HSK) might be abolished to facilitate REE mining and processing.

This would permanently destroy many natural flora and fauna reserves where the medicinal properties of many indigenous species have not yet been investigated.

Potential cures for human diseases may be destroyed unknowingly. Environment Impact Assessment (EIA) mechanisms in the past have failed to adequately assess potential risks.

There is no question that REE mining would lead to rising temperatures in the immediate environment, and the surrounding areas would be more prone to floods. Waterways run the risk of becoming polluted.

In the light of the above arguments any future of REE mining and processing should be critically reexamined.

Not only is the profitability of REE industries questionable, but the negative public externalities may be too costly.

With China controlling up to 90 percent of the global market, REE would be too risky for small niche players to enter.

The Madani government is interested in developing Rare Earth Element (REE) extraction in Malaysia, especially the non-radioactive rare earth elements (NR-REE).

The policy is aimed at facilitating Malaysia to become a major producer moving far beyond extraction to mid-stream and downstream processing ores into magnets (‘mine-to-magnet’) and other materials.

This is based upon the National Mineral Industry Transformation Policy (2021-2025) developed by the former administration.

Although interest in processed REE is based on positive market forecasts for EVs, electronics, and sustainable energy production, where forecasts expect the REE market to be in excess of USD 6.26 billion by 2030, this requires the market almost doubling in size from a base of USD 3.95 billion in 2024, over the next 5 years.

This figure requires further scrutiny. Production volumes are not rising, higher prices are the major reason why the size of the global market is seen to be growing.

In fact, some figures indicate annual production volumes are actually decreasing.

China currently dominates the global REE market producing 60 percent of mining output and 90 percent of refined products.

China has restricted exports over the last 18 months, primarily in response to national security issues, and as a response to the current trade war with the U.S.

The aggregate global supply of REE strongly correlates with the state of China-U.S. trade tensions, rather than production capacities.

Any positive trade moves between China and the U.S. could greatly increase supply and lower prices.

The U.S. has been seeking REE agreements with a number of nations. Over the last month, The U.S. has signed REE supply agreements with Australia, Cambodia, Thailand, Vietnam, Ukraine, Japan, as well as Malaysia.

The U.S. rationale is to degree reliance upon China, where the U.S. obtains 70 percent of its needs, and widen potential sources to put pressure on Chinese “price floors”.

On October 20, at a signing ceremony with Australia in the White House, U.S. president Donald Trump said he wants to see REEs to be worth USD 2 per kilogram in the near future.

The U.S. clearly aims to build up supply of REE and lower prices in the long-term.

The current prices of neodymium-praseodymium oxide trades around $60–$110/kg under U.S. government-backed floors.

However, the most critical factor influencing price and supply of REE, at least in the short-term will be what China does.

This creates some major concerns about the financial viability of mining, leaching, and processing into products in Malaysia.

The costs of land preparation are high, as would be mining leaching and processing.

Any fall in the prices of REE could render any sunrise REE industry uncompetitive immediately.

Should China want to eliminate potential competitors, it will simply lower prices to put competing REE industries out of business.

This is a major risk factor for any future Malaysian producers.

Malaysia aims to attract RM 100 billion in investment and acquire the technologies required to process and manufacture REE products like magnets.

Malaysia wants to obtain 12-15 percent of the global supply of REE which on current market size (USD 3.9 billion) would equate to RM 4.5 to 4.9 billion per annum.

Its difficult to see how the return of investment could be attractive enough for private investors.

The negative externalities of REE production in Malaysia

Malaysia’s Environmental, Social and Governance (ESG) policy was launched on October 2, 2023. REE will never meet the criteria of being a sustainable economic activity.

The deep holes from tin mining a century ago still scar Malay landscape.

It is believed the discoloring of the Sungai Perak (Perak River) was the result of REE leaching. Radio active material around Bukit Merah after REE extraction still exists.

There is a worry by some NGOs that permanent Forest Reserves (HSK) might be abolished to facilitate REE mining and processing.

This would permanently destroy many natural flora and fauna reserves where the medicinal properties of many indigenous species have not yet been investigated.

Potential cures for human diseases may be destroyed unknowingly.

Environment Impact Assessment (EIA) mechanisms in the past have failed to adequately assess potential risks.

There is no question that REE mining would lead to rising temperatures in the immediate environment, and the surrounding areas would be more prone to floods. Waterways run the risk of becoming polluted.

In the light of the above arguments any future of REE mining and processing should be critically reexamined. Not only is the profitability of REE industries questionable, but the negative public externalities may be too costly.

With China controlling up to 90 percent of the global market, REE would be too risky for small niche players to enter.

The Madani government is interested in developing Rare Earth Element (REE) extraction in Malaysia, especially the non-radioactive rare earth elements (NR-REE).

The policy is aimed at facilitating Malaysia to become a major producer moving far beyond extraction to mid-stream and downstream processing ores into magnets (‘mine-to-magnet’) and other materials.

This is based upon the National Mineral Industry Transformation Policy (2021-2025) developed by the former administration.

Although interest in processed REE is based on positive market forecasts for EVs, electronics, and sustainable energy production, where forecasts expect the REE market to be in excess of USD 6.26 billion by 2030, this requires the market almost doubling in size from a base of USD 3.95 billion in 2024, over the next 5 years. This figure requires further scrutiny.

Production volumes are not rising, higher prices are the major reason why the size of the global market is seen to be growing. In fact, some figures indicate annual production volumes are actually decreasing.

China currently dominates the global REE market producing 60 percent of mining output and 90 percent of refined products.

China has restricted exports over the last 18 months, primarily in response to national security issues, and as a response to the current trade war with the U.S.

The aggregate global supply of REE strongly correlates with the state of China-U.S. trade tensions, rather than production capacities.

Any positive trade moves between China and the U.S. could greatly increase supply and lower prices.

The U.S. has been seeking REE agreements with a number of nations. Over the last month, The U.S. has signed REE supply agreements with Australia, Cambodia, Thailand, Vietnam, Ukraine, Japan, as well as Malaysia.

The U.S. rationale is to degree reliance upon China, where the U.S. obtains 70 percent of its needs, and widen potential sources to put pressure on Chinese “price floors”.

On October 20, at a signing ceremony with Australia in the White House, U.S. president Donald Trump said he wants to see REEs to be worth USD 2 per kilogram in the near future.

The U.S. clearly aims to build up supply of REE and lower prices in the long-term. The current prices of neodymium-praseodymium oxide trades around $60–$110/kg under U.S. government-backed floors.

However, the most critical factor influencing price and supply of REE, at least in the short-term will be what China does.

This creates some major concerns about the financial viability of mining, leaching, and processing into products in Malaysia.

The costs of land preparation are high, as would be mining leaching and processing. Any fall in the prices of REE could render any sunrise REE industry uncompetitive immediately.

Should China want to eliminate potential competitors, it will simply lower prices to put competing REE industries out of business. This is a major risk factor for any future Malaysian producers.

Malaysia aims to attract RM 100 billion in investment and acquire the technologies required to process and manufacture REE products like magnets.

Malaysia wants to obtain 12-15 percent of the global supply of REE which on current market size (USD 3.9 billion) would equate to RM 4.5 to 4.9 billion per annum. Its difficult to see how the return of investment could be attractive enough for private investors.

The negative externalities of REE production in Malaysia

Malaysia’s Environmental, Social and Governance (ESG) policy was launched on October 2, 2023. REE will never meet the criteria of being a sustainable economic activity.

The deep holes from tin mining a century ago still scar Malay landscape. It is believed the discoloring of the Sungai Perak (Perak River) was the result of REE leaching. Radio active material around Bukit Merah after REE extraction still exists.

There is a worry by some non-governmental organisations that Permanent Forest Reserves (HSK) might be abolished to facilitate REE mining and processing.

This would permanently destroy many natural flora and fauna reserves where the medicinal properties of many indigenous species have not yet been investigated.

Potential cures for human diseases may be destroyed unknowingly. Environment Impact Assessment (EIA) mechanisms in the past have failed to adequately assess potential risks.

There is no question that REE mining would lead to rising temperatures in the immediate environment, and the surrounding areas would be more prone to floods. Waterways run the risk of becoming polluted.

In the light of the above arguments any future of REE mining and processing should be critically reexamined.

Not only is the profitability of REE industries questionable, but the negative public externalities may be too costly.

With China controlling up to 90 percent of the global market, REE would be too risky for small niche players to enter.

*Murray Hunter has been involved in Asia-Pacific business for the last 40 years as an entrepreneur, consultant, academic, and researcher.*