Why China's US Rare Earths Ban is a Win for Australia

You could’ve seen this coming a mile away.

China first pulled off this move in 2010 with Japan, and again in 2023 restricting exports of rare earths to the US. China’s stance has been consistent: “There is no winner in a tariff war. China does not want to fight, but is not afraid to fight,” as reported by AFP.

It’s a power play straight from the Trump-era trade war board game, and unlike tariffs, there’s little the US can do to retaliate in kind. This isn’t just a counterpunch, it’s like the US just lost its Queen in a global chess match. Despite the US upping their tariffs to 245%, checkmate might be next.

China’s decision to restrict exports of rare earth metals to the US, sent instant shockwaves through global supply chains, especially for electronics, defence, and green tech. But while the US is left scratching its head, one country stands to benefit in a big way: Australia.

So what are rare earths, and what’s the big deal?

Funnily enough, rare earths aren’t actually that rare and are relatively abundant in the Earth's crust. The “Rare” is due to the complex and environmentally damaging process of extracting these elements from their mixed ore deposits. In the US it can take up to 20 years before a rare earth mine is in production.

These Rare earths are 17 special metals, used in nearly every high-tech product from smartphones and electric vehicles to wind turbines and F-35 fighter jets. Neodymium, for example, helps make super-strong magnets found in EV motors. Yttrium and europium make colours pop on TV screens. They’re also critical in lasers, MRI machines, and guided missiles. Heavy rare earths are used in missiles, radar, and Predator unmanned aerial vehicles. But most of all, they are crucial for semiconductors.

So why the drama?

China controls about 60% of global rare earth production and a whopping 92% of processing, meaning it dominates the entire supply chain.

This is a major problem for the US, which relies on China for 70% of its rare earth imports. Without access, US defence and tech companies cannot secure the materials they need to manufacture products.

The below diagram of the F-35 Jet Fighter (Source IISS analysis), it shows just how critical these elements are, with over 400 kilograms of rare earth elements found in each jet.

Here’s where Australia comes in.

Australia is the world’s third-largest producer of rare earths and one of the few countries with the expertise to mine and refine them responsibly. Companies like Lynas (ASX: LYC), Iluka Resources (ASX: ILU) and Arafura Rare Earths (ASX: ARU) have seen their share prices soar recently, up nearly 30–70% in just a few months.

And it makes sense.

US manufacturers have a few months of reserves, before they will be desperately looking to Australia, with its rich reserves, political stability, and strong environmental regulations, to fill the gap.

This is a big opportunity.

If Australia plays its cards right, it could become a trusted global supplier of rare earths, especially to countries that are in desperate need of supply. This could boost jobs, investment, and could be the start of our next mini mining boom.

Here is the Lynas (LYC) 15 year chart - You can see very early on, the massive rise in share price back in 2011, which was the first rare earths boom. Shares went to $24.50 after China banned exports to Japan.

Here is the Lynas (LYC) - 1 Year showing a technical break out - Lynas has broken out from its long-term descending channel that’s been in play since early 2022. After several failed attempts, the recent move above the upper trendline signals a clear upside breakout on strong volume, classic bullish confirmation. If this breakout holds, it could mark a major trend reversal, with the next resistance level around $10.00. Continuation of this bullish momentum gives Lynas a buy signal, especially given the macro backdrop of rare earth export tensions.

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