Government needs to go back to basics to build an Australian rare-earths industry

Australia’s ability to make meaningful inroads into the downstream processing and manufacturing of critical minerals is hobbled by the downsizing of the country’s established metals processing industry over the past two decades.

The closure of plants, often under the pressure of Chinese competition, has reduced career opportunities in the technical fields that are needed to build and operate the highly complex processing and manufacturing technologies that many critical minerals require.

Perhaps a pivot moment was BHP’s 1999 decision to shut its Newcastle steel mill and associated rolling plan, concluding it could not compete with much larger and more modern mills in Japan and South Korea.

In 2004, BHP shut its Boodarie clinker plant designed to upgrade iron ore exports and built at a cost of $2.5 billion over the previous eight years. Rio Tinto shut its Hismelt plant, which used innovative technology to produce high-quality pig-iron in 2008, just three years after it had opened.

Bluescope, which purchased BHP’s major steel assets, shut Australia’s only tin mill at Port Kembla in 2006. In 2011, it shut one of its blast furnaces and coke ovens at Port Kembla along with its hot strip mill at Hastings in Western Port Bay. Australia can no longer manufacture stainless steel or tinplate.

The aluminium industry has also been contracting. Alcan closed its Kurri Kurri aluminium smelter in 2012 while Alcoa shut its Point Henry smelter at Geelong in 2014, along with rolling mills both there and at Yennora. Australia no longer has the capacity to manufacture flat aluminium products.

A number of the major metals processing plants that survive are relatively marginal operations, often battling the threat of closure. Australia’s remaining aluminium smelters at Portland in Victoria, Tomago in New South Wales, Boyne Island in Queensland and Bell Bay in Tasmania have all had to overcome challenges to their future over the past decade.

Glencore’s copper smelter at Mt Isa and copper refinery in Townsville both faced closure in 2020 but were given another three years of operation, which expires this year, after the Queensland government provided a subsidy.

The Ravensthorpe nickel processing plant in Western Australia and the Yabulu nickel refinery at Townsville have both battled closure, though Yabulu is expected to gain a new lease of life after being sold to a Swiss concern in December.

As a result, metallurgy is not a promising career for aspiring engineers. A 2021 review by the Australian Council of Engineering Deans of graduate specialisations concluded that the combined field of mining, metallurgy and petroleum engineering was in ‘clear decline’.

The study found that the number of domestic graduates with bachelor’s degrees dropped by 40% to just 141 in the four years to 2019. The number graduating with master’s degrees had halved to only nine. The figures are better in chemical engineering, and much of the processing of critical minerals draws on that expertise, but the numbers are still tiny. Immediate metallurgy vacancies are being filled by Indian migrants, but that is hardly enough.

The comparison is invidious, but while Australia had a total of 6,900 engineering graduates in 2020, China recorded 1.4 million in 2021, up from 840,000 a decade earlier.

ranking of the world’s top 100 universities for the study of metallurgical engineering listed 28 Chinese institutions, including 10 of the top 20. The list included just three Australian universities: the University of Queensland (ranked 15th), the University of New South Wales (79th ) and Deakin University (86th). UNSW complained in 2018 that enrolments in its mining engineering course had dropped from 120 to six over the previous four years.

China has made the build-up of expertise in new materials a state priority for almost 40 years. China’s focus in the area long predates the realisation that critical minerals, particularly the 17 rare-earth elements, would supplant steel and oil as the drivers of economic development in the 22nd century.

In 1986, China’s then leader, Deng Xiaoping, approved what became known as the ‘863 program’ for high-technology research and development (it was launched in March 1986).

It specified seven fields of common interest to both national security and commercial development that would receive priority research funding. The sectors selected were automation, biotechnology, energy, information technology, lasers, new materials and space technology.

In the 1970s, an eminent Chinese chemical scientist, Xu Guangxian, who had been pivotal in the development of China’s nuclear weapons, invented a simplified process for separating the rare-earth elements from the iron ore obtained from the Bayan Obo mine in northern China.

The first specialist rare-earths research institute was established adjacent to the mine in 1962. In 1987, China established the State Key Laboratory on Rare Earths Chemistry and Physics, under the direct supervision of the Chinese Academy of Sciences. Other state laboratories specialising in rare earths followed.

Today the Chinese Society of Rare Earths, established in 1980 as a research network, boasts more than 100,000 affiliated researchers. Its subcommittees cover every conceivable field of rare-earths research. In 2003 China overtook the United States in the number of scientific papers on rare earths published annually, and it has accounted for more than half the patents awarded for rare earths globally since 2011.

Deng’s aphorism that ‘the Middle East has its oil, China has rare earth’ is often quoted; however, China has moved well beyond an aspiration to monopolise the production of rare earths. It aims for leadership in the production of the full range of goods making use of rare earths—from electric cars to wind turbines, MRI scanners, lasers and rocket motors. China is increasingly turning to imports of the raw or lightly processed rare earths to supply its industry. Although China possesses the world’s largest reserves of rare earths, its production is not enough to satisfy its needs.

As well as the end products, China dominates all the associated inputs, ranging from chemicals and gases to tantalum crucibles and other specialised equipment.

Separating rare-earth elements is complex, with each orebody having a unique combination. It took Australian company Lynas, its shareholders and Japanese bankers eight years of patience to get its plant in Malaysia producing rare earths to the specifications of its customers. Turning rare-earth oxides into metals is also complex metallurgy, and little of is it done outside China.

The Australian government sees building a critical minerals industry as a matter of national economic sovereignty. Its ambition is that, first, precursor products will be manufactured in Australia, and then that Australia eventually becomes a significant producer of technologies like solar panels, permanent magnets and batteries.

As a first step, it is subsidising the construction of a $1.2 billion rare-earths processing plant, extending a non-recourse loan to long-established mineral sands miner Illuka. The plant will be built drawing on French expertise and design.

Perhaps a more urgent priority should be to develop a national strategy to stabilise Australia’s basic metals manufacturing capability so there is some sort of industrial base upon which a new industry could be built. As it is, it’s left to state governments—which may be impelled by the ad hoc need to ‘save jobs’ when closures loom—to step into the breach.

Next month, ASPI, with the Northern Territory government’s ‘Investment Territory’ program, will host the inaugural Darwin Dialogue. The 1.5 track dialogue will bring together government, industry and academia representatives, including delegations from Japan and the United States, to discuss establishing secure supply and value chains for mining, processing and refining critical minerals outside China.