September 30, 2019 / 2:28 PM / 16 days ago

Australia sees opportunity to boost critical minerals supply to U.S.: report

MELBOURNE (Reuters) - Australia has a fresh opportunity to supply the United States with critical minerals after recent changes to U.S. regulation aimed at cutting its dependence on China, an Australian government report showed on Tuesday.

U.S. President Donald Trump in July signed five memoranda authorizing U.S. Department of Defense funding to be directed to resources or technology “essential to the national defense” in a move aimed at shoring up domestic supplies.

That opens the door for the United States to offer project funding for rare earths, a group of 17 elements used in products ranging from lasers and military equipment to magnets found in consumer electronics, according to the report by Australia’s Trade and Investment Commission.

China supplied 80% of the rare earths imported by the United States from 2014 to 2017.

“The U.S. government has taken the decision to reduce dependence on China-based supply chains. In the case of purchasing by the U.S. Department of Defense, this policy is now mandatory,” the Commission said in a report.

“This has opened a new opportunity for Australian companies to supply a growing U.S. specialist manufacturing industry with the required raw or semi-processed materials.”

U.S. President Donald Trump and Australian Prime Minister Scott Morrison were due to meet earlier this month to discuss details of an agreement on rare earth supply, according to a senior administration official.

No details of the discussions have since been released.

U.S. reliance on foreign minerals has worried U.S. officials since 2010, when China embargoed exports of so-called rare earth minerals to Japan during a diplomatic row.

The issue took on new urgency earlier this year after Chinese officials suggested rare earths and other critical minerals could be used as leverage in the trade war between the world’s largest economic powers.

Australia said establishing a consortium between government, defense firms and critical minerals companies to finance new projects via debt and direct investment, as well as arranging supply agreements could help revitalize the U.S. industry.

“The lack of downstream processing capability at scale in the U.S. presents both a challenge and an opportunity for the Australian critical minerals sector,” it said.

This could also be used to develop new downstream processing capabilities in Australia as well as the U.S, it said.

Australia’s Lynas, the world’s biggest rare earths producer outside of China, has a preliminary agreement with Blue Line of the United States to build a heavy rare earths processing plant in Texas.

Its chief executive said in August that it had not made a final decision on where it would build its plant, however, and that it would be open to funding from the United States.

The U.S. Commerce Department in June recommended urgent steps to boost domestic production of rare earths and other critical minerals, warning that a halt in exports from top suppliers in China or Russia could cause “significant shocks” in global supply chains.

Reporting by Melanie Burton; Editing by Jan Harvey

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