On the front page of the Chinese daily newspaper the Global Times on Wednesday, the Chinese government sent a stark warning to the United States.
An unnamed Chinese government official declared America's supply of rare earth metals could be the next target for retaliation in the tit-for-tat trade war.
Lynas’s rare earths mine in Mount Weld Western Australia. Source: AAP
Rare earth metals are used in making electric cars, wind turbines, as well as some military and other high-end technology products.
Wang Changlin from China's National Development and Reform Commission told a local TV network foreign countries reliant on China's rare earths should be careful.
“If some countries, some enterprises, use our rare earth resources to makes products, some high-tech products, to restrain us, or even suppress us, they will seriously hurt the feelings of the Chinese people,” he said.
The threat of that brewing trade war retaliation has shifted the global focus on to Australian mining company Lynas Corporation, which is the only other major producer of rare earths outside of China.
The rare earths are mined in Mount Weld in Western Australia, before being sent for processing Malaysia and the final product is then shipped to major manufacturers in the United States, Europe and Japan.
A worker at Lynas's rare earths mine at Mount Weld in Western Australia. Source: Supplied
China’s threat to cut off America’s rare earths supply on Wednesday sent Lynas shares skyrocketing by more than 15 per cent to a 15 month high.
In the US, President Donald Trump ordered the Pentagon to reduce America's reliance on Chinese rare earths, amid concerns about military manufacturing.
Australian resources analyst Andrew White, from stockbroking firm Curran and Co, said Lynas's global strategic value can't be overstated.
“Mount Weld is actually the highest grade mine outside of China, actually in the world, so it's a very strategic asset not just for Australia but for the USA and Japan as well,” Mr White told SBS News.
Lynas's shares have been buoyed by the rising tensions between China and the US. Source: Supplied
But the past year has been far from smooth sailing for Lynas.
The new Malaysian government, which came to power in May last year, has cracked down on regulations surrounding the company’s processing plant on the east coast of Malaysia.
The production of rare earths has a low level radioactive runoff which has concerned Malaysian environmentalists and some nearby residents.
The government has given Lynas until September to clean up its radioactive waste, or face the prospect of losing their operating license, forcing Lynas to look at new investment, including the prospect of doing the initial processing of the rare earths in Western Australia to remove the radioactive elements.
The company has also signed a Memorandum of Understanding with an American company and is looking at building a new processing plant in Texas.
“Long term really the future looks very bright for Lynas, and these short term hurdles we expect they will be able to overcome those,” Mr White said.
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