Ace Business Desk – From his tiny outlet in Northcote, just outside Melbourne’s CBD, Mike Newbon has unwittingly found himself at the centre of a stand-off between Donald Trump and Xi Jinping.

Ever since April, when Chinese authorities quietly shut off access to rare earth supplies to the US, Newbon has been fielding emails and calls from suppliers and manufacturers desperately scouring the globe for a highly specialised bit of gear.

From a corner of a shop that specialises in selling rugs, Newbon has built a niche business, Fastmag, supplying manufacturers with magnets.

But not just any old magnets.

He supplies what’s known as permanent magnets, components that incorporate a rare earth known as Neodymium, which are used in everything from health imaging to sound equipment and electric motors.

Suddenly, he’s found himself a man in demand from buyers he’s never heard of.

“They’re desperate and they’re big orders,” he explains.

“You can see what’s happened. People have woken up and realised they need half a million magnets to produce half a million widgets, and they can’t get them until this disagreement gets sorted out.”

It all began shortly after US President Donald Trump launched his “Liberation Day” tariffs in April. China retaliated, not just with trade barriers of their own, but with controls on the export of rare earth magnets.

Given the magnets are used in everything from cars to refrigerators and almost every conceivable appliance, shortages like this play havoc with industry across the economy.

It was a situation that continued even after US Treasury Secretary Mike Bessent met with China’s Vice-Premier He Lifeng in Geneva last month, and has left US manufacturers reeling.

Little wonder it has precipitated further talks between the two superpowers in London this week.

As the meeting wrapped up, the US president used his social media platform to declare a “deal with China is done”, and was sure to single out the in-demand metals.

“Full magnets, and any necessary rare earths, will be supplied, up-front, by China,” he posted on Truth Social, but a formal agreement is yet to be inked.

Scott Bessent and He Lifeng meet in London. (Reuters: United States Treasury)normal

Like all trade disputes, both sides are hurting as a result.

“The factories that we deal with in China, it took them a while to realise that they were caught up in this as well,” Newbon tells ABC News.

“They literally cannot get exports of rare earth magnets through their customs.

“That’s all they produce, so these factories are in all sorts of trouble too, so their bosses are trying to get dual certificates or exemption certificates and we’re in the process of doing that ourselves.”

Not so rare

For all the talk about rare earths, they remain a mystery to most.

For a start, they aren’t all that rare. Most of the 17 rare earths are scattered widely across the planet’s surface. And that’s part of the problem.

Because they’re so widely distributed, it’s rare for them to be found in any concentrated form. Mostly, that requires miners to churn through vast amounts of dirt to extract relatively small amounts.

Rare earths mining involves separating out the valuable ore from vast quantities of rock and sand. (Reuters: Steve Marcus)normal

Often, they are a by-product of sand mining or incorporated in other deposits.

Refining them is an equally difficult and dirty job, occasionally involving nuclear waste.

First, they need to be separated from other compounds, then isolated into their individual components.

That’s before they are refined into a product that can be incorporated into an industrial use.

All up, it’s an expensive process.

And not all rare earths are equal. Neodymium is a light rare earth, useful for producing magnets for componentry for everyday products.

It is the heavy rare earths that have become prized — supplies of heavy rare earths like Terbium and Dysprosium have become constrained while demand is accelerating.

Their main advantage is that they have a resistance to demagnetisation, allowing them to continue working in higher temperatures.

That makes them ideal for use in military applications, aerospace, electric vehicles and in renewable energy generation.

Heavy rare earths are less common and have a higher atomic weight than light rare earths. (Reuters: David Becker)normal

Critical and political

When it comes to rare earths, China rules the roost.

Endowed with large and more concentrated deposits, it plunged headlong into extraction and, more importantly, refining and industrial application back in the 1990s.

It is never easy to isolate the exact numbers. Overall, Beijing controls about 90 per cent of rare earth refining.

But in the all-important arena of heavy rare earths, it has total domination.

Chris Bevan, the executive chair of Metallicum Minerals Group, which has aspirations of rare earth processing, describes China’s effective monopoly as a “major problem”.

“These permanent magnets have not merely essential, but existential importance for defence purposes.”

If the US government wants to keep building F35 fighter jets, it will need to rely upon Beijing delivering the magnets that will allow them to fly, a situation that could become tricky if hostilities ever escalate into a military confrontation.

When it comes to light rare earth magnets, China has a commanding lead at around 70 per cent market share while the US has several prominent permanent magnet manufacturers.

But that all could change.

A few hours north of Perth in the tiny town of Eneabba, a huge mound of rare earth-rich monazite has been fortuitously accumulated for decades by mineral sands group Iluka Resources.

No-one quite knows or can recall who gave the order to store what then was an unsaleable by-product. But, with the help of federal government funding, it is about to transform Iluka into a strategically important operation.

It is in the advanced stages of constructing a refining plant that will supply the heavy rare earths required to sever the Western alliance’s dependence upon China.

Lynas Rare Earths, another major Australian operation, for years has been a major producer and refiner of light rare earths. But it recently announced that it would be looking to isolate heavy rare earths.

Lynas digs up and processes rare earths at Mount Weld in Western Australia, before shipping them to Malaysia. (Reuters: Sonali Paul)normal

With processing plants in Malaysia and Kalgoorlie and another under construction in the US, Lynas is in a race with Iluka to be the first operator with a plant capable of refining heavy rare earths outside of China.

A Made-In-Australia opportunity?

Fortune smiles upon the Lucky Country, which is blessed with stunning landscapes and boasts a treasure trove of rare earths. The heavy rare earths are valuable, adding to the nation’s rich natural bounty.

Extracting them has been difficult because the world’s biggest producer, China, has been accused of routinely manipulating the market to force prices lower whenever a potential rival emerges.

And in recent years, it has used its dominant position to punish countries it deems has acted against its best interests, as it has done in recent months against the US.

That now has Australian politicians pondering whether Australia could utilise its strategic advantage and create a new manufacturing base, to add value to our minerals rather than merely sending them off in raw form.

More than $1.6 billion has been invested in Iluka’s new plant, tax incentives for critical minerals have been provided, and plans to create a fund for purchasing mineral reserves have been announced.

The Iluka plant will produce refined heavy rare earths.

But perhaps an opportunity has arrived that could break China’s stranglehold on high-end rare-earth magnets and add even more value by manufacturing them instead in Australia.Loading…

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