Malaysia has announced plans to develop a policy that will prohibit the export of rare earth raw materials. Prime Minister Anwar Ibrahim disclosed this decision on Monday, emphasizing the need to prevent resource exploitation and loss. This move places Malaysia among the growing list of countries imposing restrictions on the shipment of critical minerals.
Malaysia’s Limited Rare Earth Reserves
Although Malaysia possesses only a fraction of the world’s rare earth reserves, estimated at around 30,000 metric tons according to data from the United States Geological Survey in 2019, this decision comes at a time when global efforts are being made to diversify rare earth supply chains away from China. China currently holds the title of the world’s largest producer of critical rare earth minerals, which are indispensable in various industries, including semiconductor chips, electric vehicles, and military equipment.
Support for the Domestic Rare Earth Industry
Prime Minister Anwar has expressed the government’s commitment to nurturing the rare earth industry within Malaysia. He believes that the export ban will ensure “maximum returns for the country.” While the timeline for implementing the proposed ban remains undisclosed, the rare earth industry is expected to make significant contributions to Malaysia’s gross domestic product (GDP) by 2025, estimated at up to 9.5 billion ringgit ($2 billion), and generate around 7,000 job opportunities.
A Comprehensive Approach to Rare Earth Development
Anwar stated that the government will embark on a detailed mapping of rare earth sources and establish a comprehensive business model that encompasses upstream, midstream, and downstream industries. This approach aims to maintain the integrity of the rare earth value chain within Malaysia.
Potential Impact on China and Investors
Malaysia’s export ban could have repercussions for China, which imported approximately 8% of its rare earth ores from Malaysia between January and July of the current year, as indicated by China customs data.
Analyst David Merriman at Project Blue suggested that the implications of Malaysia’s ban remain uncertain due to the lack of specific details. However, it’s worth noting that a ban on rare earth ore exports may affect Chinese companies operating in Malaysia. Merriman commented,
“The legislation could have some negative impacts on potential investment in Malaysia from Chinese parties, which have looked to other Asian nations to source unprocessed or mixed rare earth compounds as feedstock for (rare earth) processing facilities in southern China.”
Australia’s Lynas Rare Earths Ltd, the largest rare earths producer outside of China, has a processing plant in Malaysia for concentrate obtained in Australia. It remains unclear whether Malaysia’s planned export ban will have implications for Lynas, as the company has not yet responded to requests for comment.
Malaysia has previously imposed restrictions on some of Lynas’ processing operations, citing concerns about radiation levels. However, Lynas has disputed these allegations and maintained its compliance with regulations.