Malaysia is communicating with China regarding rare earth cooperation

KUALA LUMPUR: Malaysia is in talks with China on rare earth cooperation to expand local refining capacity after the government banned the export of unprocessed materials.

The secretary-general of the Ministry of Economic Affairs, Dato' Noor Azmi Dizon, said negotiations were difficult as China's policy is to only import raw materials and does not allow its processing plants or technology to be transferred abroad.

"The issue with rare earths is the technology, which is held by China," he said today at a Brown Bag talk at the Malaysian Institute of Economic Research (MIER) titled "RMK13: Policy Empowerment to Maintain Economic Growth".

Noor Azmi was responding to a participant's concern that Malaysia relies on exporting raw materials such as bauxite rather than processing them locally, where high-value-added products like aluminium can generate higher returns.

He stressed that Malaysia has adopted a policy to stop the export of bauxite and rare earths.

"Of course, currently we have suspended the export of raw materials. Whether it's bauxite or rare earths," he said.

Noor Azmi explained that Malaysia hopes to maintain a balance of cooperation between Lynas in Australia (which is already operating in the country) and potential cooperation with China.

"Our intention is to have both. We consider Australia as Western, but we also need to have a Chinese component in Malaysia," he said.

It is estimated that Malaysia's huge rare earth reserves are worth more than US$200 billion (RM844 billion), but the country lacks the technology to process rare earths.

Last month, Malaysia banned the export of unprocessed rare earths.

The Minister of Investment, Trade and Industry, Tengku Dato' Seri Zafrul Abdul Aziz, said the government hopes international companies will invest in downstream processing in Malaysia instead of shipping raw materials abroad.

He said the government is positioning Malaysia as a processing hub rather than a raw material supplier.

Tengku Zafrul said Lynas, the Australian rare earth company, is one of the companies currently allowed to export rare earths from Malaysia. The company processes rare earths in Gebeng, Pahang, and mines in Gua Musang, Kelantan.

Rare earths are crucial for electric vehicles, renewable energy technologies and electronics, and China dominates the global supply chain.

Although China's mineral production accounts for about 70% of the global total, the Chinese government controls nearly 90% of the global processing business, and its refining and separation technologies are almost monopolized and not exported.

According to the US Geological Survey, 70% of the rare earths imported by the United States in 2024 came from China, followed by 13% from Malaysia, 6% from Japan, and 5% from Estonia. Some supplies outside China still come from concentrates processed in China and Australia.

He emphasized that Malaysia has adopted a policy to stop the export of bauxite and rare earths.