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Malaysia seeks Chinese partnership to develop rare earth industry and combat illegal exports

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Malaysia is seeking collaboration with China to develop its rare earth elements (REEs) sector and address concerns regarding illegal mineral exports.

Minister of Science, Technology and Innovation Chang Lih Kang is scheduled to visit China in late April to explore investment opportunities for a processing plant in Malaysia, as reported by the Straits Times. Despite China’s recent ban on exporting rare-earth extraction and separation technologies, Malaysia hopes to negotiate an exception to establish an alternative supply chain.

“We are aiming to expand our role in the rare-earth supply chain,” stated Minister Chang.

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China currently dominates the rare earth market, possessing vast reserves and controlling the majority of the world’s production and processing capacity. Rare earths are essential for various modern technologies, including wind turbines, electric car batteries, smartphones, and defense systems.

While Malaysia operates a processing plant, operated by Australian company Lynas, it lacks sufficient capacity to process domestically mined ore. In contrast, China possesses the technology to process all 17 rare earth elements.

According to Natural Resources and Environmental Sustainability Minister Nik Nazmi Nik Ahmad, Malaysia holds significant reserves of non-radioactive REEs valued at approximately RM 800 billion (US$ 170 billion), with potential for even greater value in the future. However, a significant portion of Malaysia’s REEs are exported illegally, resulting in substantial financial losses.

To combat illegal exports, Malaysia implemented a ban on unprocessed rare earth exports at the beginning of the year. Only one legally certified mine received an exemption, highlighting the urgency to develop domestic processing capabilities.

Prime Minister Anwar Ibrahim emphasized the ban’s aim to maximize returns for Malaysia, with expectations of significant contributions to GDP and job creation from the rare earth industry. However, experts caution that smuggling may continue despite the ban, citing low fines for offenders.

In response to the situation, lawmaker Howard Lee Chuan How proposed the formation of a parliamentary caucus on critical minerals. Lee advocates for industry-specific regulations to optimize the sector’s profitability and curb illegal exports, emphasizing the need for a strategic approach akin to Malaysia’s state-owned oil and gas company, Petronas.

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