The Hinrich Foundation Trade Podcast
Hinrich Foundation is a unique Asia-based philanthropic organization that works to advance mutually beneficial and sustainable global trade.
We believe sustainable global trade strengthens relationships between nations and improves people’s lives. We support original research and education programs that build understanding and leadership in global trade. Our approach is independent, fact-based and objective.
The Hinrich Foundation Trade Podcast
Special Ep. - Why rare earths are a critical test of redrawing supply chains
In this special edition of Current Accounts, the Hinrich Foundation’s podcast on global trade, the Association of Foreign Press Correspondents-USA sits down with Naoise McDonagh, Senior Lecturer, Edith Cowan University, to unpack the crucial role of rare earth minerals in the global economy.
Rare earths are vital for advanced manufacturing, powering industries like electric vehicles, defence, and robotics. China dominates their supply, controlling 90% of processed rare earths, which gives it significant geopolitical leverage. Rare earths are classified as critical minerals due to their strategic importance and supply chain vulnerabilities. While countries like the US and Australia are seeking alternatives, China's processing monopoly and price volatility complicate efforts. Australia, with projects like Lynas, aims to reduce dependency, but global demand, especially from China, poses ongoing challenges. McDonagh concludes that the rare earth market is shifting towards strategic, state-backed production partnerships, particularly with allied nations.
Tune into this podcast as Naoise McDonagh, Senior Lecturer, Edith Cowan University, joins the Association of Foreign Press Correspondents-USA to break down the crucial role of rare earth minerals and how Australia is laying the grounds to position itself as an alternative supplier of China in rare earth elements. The podcast follows up on McDonagh’s recent paper for the Hinrich Foundation, “Australia’s rare earths lie between economic security and liberal markets.”
Tune into the Hinrich Foundation’s podcast series for insights on international trade.
HERE IS AN EXCERPT FROM THEIR CONVERSATION:
Adam Creighton: Is there a scramble in the US, Australia and Japan to mine rare earths at home, like domestically or not?
Naoise McDonagh: Yeah, look, it's an interesting one, right? Currently there is, because this year has been so disruptive and China played its card so well, but this has been building up for a long period of time. China has been utilizing its strategic control over rare earths for a long period of time, not just cutting off Japan, which it did twice. But also, what it would do – and this is typical monopoly strategy, private firms actually perfected these techniques during the 20th century. So, if you're a major monopoly power - you’re dominating the market, you've built up a lot of capital, and you have funds for rainy days. If you have a new entrant trying to enter the market, even if they have a better product, they normally won't have the long-term funding in place and will be more vulnerable. And you can just crash your price. You can take a loss for one year, two years if you must, because you've got your big economic mode to protect you. And so, you drive the new entrants out of the market, or if they enter, you kill them within a year. And then over time what happens is that investors say, you know what? We're not even trying this market because we know what will happen. Not only are we not playing a fair economic game, but we're actually playing against the government of the biggest or second biggest and biggest by purchasing power parity economy in the world. That government doesn't care about commercial losses if there's a big enough strategic gain to be had. And so private investors have not invested in that market, and the governments haven't done much despite the fact that this was on the cards. They've been very lethargic around doing anything significant that would bring investors in. That's changing this year, Adam, and we can go into that a little bit if you wish.