China-US trade war

Lynas gets KL reprieve on rare earth waste cleanup

Aussie firm gets nod for its six-year plan, can keep operating ore refining plant in Kuantan

Rare earths dug up and processed into concentrate at Mount Weld in Western Australia, after being shipped to the Lynas plant in Gebeng, Malaysia, in 2014. PHOTO: REUTERS

Malaysia has given rare earth producer Lynas breathing space to clean up its waste, as the Australian company becomes a crucial global supplier of the metals amid the ongoing US-China trade war.

Until recently, Lynas faced losing its licence in September unless it shipped out 450,000 tonnes of waste material from its US$800 million (S$1.1 billion) ore refining plant in Kuantan, Pahang.

But last Thursday, the government changed its tune.

Speaking at the Nikkei business conference in Japan, Prime Minister Mahathir Mohamad said that "we will allow Lynas to carry on, otherwise we are going to lose a very big investment from Australia".

Lynas still has to tackle its waste stockpiles, but Tun Dr Mahathir's remarks signalled approval for the firm's six-year plan to make its Malaysian operations radiation-free.

"There has been an apparent shift on Lynas. Dr Mahathir could definitely leverage on Lynas being the largest producer of rare earths outside China and use this as a 'Malaysian card' to play in the China-US trade war," S. Rajaratnam School of International Studies' senior fellow Johan Saravanamuttu told The Straits Times.

According to Chinese media, Beijing is ready to use its rare earth supply to strike back in its trade war with the United States.

China controls over 70 per cent of the world's production of rare earths and meets 80 per cent of US demand.

In the face of possible supply threats, Lynas has become strategically important as the only major rare earth producer outside China, accounting for 12 per cent of global supply.

The highly sought-after minerals are used in high-tech electronics and military applications.

Lynas has faced sustained public protest in Malaysia since 2011, chiefly over concerns of radiation poisoning, and more recently contamination of the local water supply.

Last December, radiation regulators under the Energy, Science, Technology, Environment and Climate Change Ministry (Mestecc) demanded Lynas export 450,000 tonnes of water-leached purification (WLP) residue by September.

This directive was issued despite a government review panel finding that "the operations over the past six years are under control and safe as the exposure to radiation hazard at the work area and its surroundings is within allowed levels".

On April 1 however, Entrepreneur Development Minister Redzuan Yusof said that "we cannot just simply force someone to take back waste", contradicting his Cabinet colleague Yeo Bee Yin, who heads Mestecc, and sparking heated exchanges with anti-Lynas leaders within the governing Pakatan Harapan coalition.

Dr Mahathir appeared to also side with Lynas in April, noting that there was no country that would accept the WLP residue and that rare earth refining could continue "if they promise that the raw material only comes here after the cracking and cleaning up".

His remarks last Thursday confirmed that Lynas could continue its operations in Malaysia.

Ms Yeo however insisted later the same day that licensing conditions still applied and that "his (Dr Mahathir's) position is Lynas has to ship out its waste".

She is seeking to meet her Australian counterparts this month to discuss Lynas' waste management, Reuters reported.

Lynas shares have doubled in value since their lowest point in March, and the company presented on May 21 an ambitious A$500 million (S$477 million) plan to investors to expand operations by 2025 which includes an Australian plant to decontaminate its ore prior to export.

"Lynas is well placed to continue to supply high-purity rare earth materials to manufacturing supply chains around the world," the company told ST.

At a green technology incentives programme last Friday, a senior Mestecc official said that rare earths were crucial for innovations like electric vehicles, which Malaysia aims to produce.

"Rare earth supply is very important to us," deputy secretary general Nagulendran Kangayatkarasu told ST. "The government's position is very clear, we would like to spur the industry."

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A version of this article appeared in the print edition of The Straits Times on June 03, 2019, with the headline Lynas gets KL reprieve on rare earth waste cleanup. Subscribe