Malaysia’s recent restriction on exporting raw rare earth minerals demonstrates how the country is establishing its own position within the rare earth supply network.
The recent restriction imposed by Malaysia on exporting raw rare earth materials suggests that the Southeast Asian nation may have a feasible opportunity—on its own conditions—to supply these essential minerals to the U.S., which is facing difficult trading relationships with China, the leading global provider, as per experts.
Malaysia’s officials announced this week that Kuala Lumpur plans to prohibit the export of untreated rare earth elements—highly valued global resources utilized in various types of electronics—to maintain domestic supply for development within related manufacturing sectors.
Malaysia’s Minister of Investment, Trade, and Industry, Tengku Zafrul Abdul Aziz, stated to the Malay Mail media source that international investors may enter the nation’s downstream rare earth sector provided their initiatives include domestic mineral refinement, employment generation, and knowledge sharing. These refined rare earth elements might then be sent abroad.
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Although numerous nations possess rare earth deposits, experts believe Malaysia’s sector is poised for growth as it already possesses refining capabilities, and U.S. purchasers of rare earth elements are actively seeking alternatives outside China.
“The current strengths of Malaysia provide it with an advantage in joining global supply networks,” stated Qarrem Kassim, an analyst from the Institute of Strategic & International Studies in Kuala Lumpur.
The equal application of this export restriction sends a message that Malaysia is prepared to use its geoeconomic power to focus on its own developmental requirements,” he stated. “This could lead to reduced foreign investments in the future.
A Southeast Asian nation’s Ministry of Natural Resources and Environmental Protection stated in a recent “business plan” that it intends to explore mining for heavy rare earth elements, which are crucial parts of daily gadgets like mobile phones and laptops, as well as in innovations such as electric cars and photovoltaic systems.
Authorities have moved forward with their goals this year by announcing plans for two additional processing facilities, stated Nordin Ramli, head of the Technology Advisory at Malaysia’s National Applied Research and Development Center, on his LinkedIn profile this month.
The government agency’s operational strategy explicitly focuses on the cultivation of “ion-adsorption clay rare earth minerals,” which are comparatively straightforward to mine.
Malaysia is home to a significant processing company — the Lynas Malaysia branch of the Australian firm Lynas Rare Earths. This facility operates as the largest rare earth processing plant globally outside of China, primarily utilizing raw materials sourced from Australia.
Lynas Malaysia accounts for 11 percent of worldwide rare earth metal production, with the possibility of raising its share, as stated in the company’s operational plan.
The business strategy, developed over two years, states that worldwide demand for a specific kind of “super-magnets” produced using rare earth elements is expected to increase by 114 percent by 2030 compared to 2020 figures.
Malaysia possesses reserves of rare earth materials worth $175 billion, as stated in a recent East Asia Forum report, prompting the nation to intensify its focus on these resources amid Western worries over potential Chinese export restrictions.
In response to
rising US tariff rates declared in April
China introduced restrictions on exports of seven rare earth materials and permanent magnets, mandating that businesses secure governmental approvals prior to sending these items abroad.
The trade restrictions caused significant disruptions across international supply networks. After
negotiations with American authorities in London at the beginning of June
The Chinese Ministry of Commerce stated at the end of the month that it would “expedite the processing of export licenses.” In July, China’s exports of permanent magnets reached a six-month peak, indicating the second consecutive month of increase following the government’s commitment to quicken the review process for export permits related to rare earth products.
“If Malaysia maintains a trade-focused international strategy, developing a key rare earth elements industry could enhance its geopolitical economic influence over the US, the EU, Japan, and other nations striving to broaden their supply chain sources,” Kassim stated.
In May, Malaysia started providing non-preferential origin certificates for goods exported to the United States. According to Tham Siew Yean, a visiting senior fellow at the ISEAS-Yusof Ishak Institute in Singapore, rare earths have been “utilized as a bargaining chip” in Malaysia’s discussions with the U.S.
“The market for processing rare earth elements is experiencing significant upheaval in the short to mid-term, with Western governments and multinational corporations striving to create more stable supply networks,” stated Rajiv Biswas, Chief Executive Officer of the Asia-Pacific Economics research company.
According to him, as the U.S. and EU aim to decrease their reliance on Chinese imports of rare earth materials, the Lynas processing plant in Malaysia has grown increasingly important strategically in 2025.
Analysts stated that Chinese companies are expected to be some of the investors eager to participate in Malaysia’s downstream rare earth industry.
China, the sole nation presently able to manufacture all 17 rare earth elements listed on the periodic table, reportedly announced in April that it has reached an agreement to
exchange processing techniques with Malaysia
to strengthen economic relations. China represents over 60 percent of worldwide rare earth mineral extraction and 90 percent of refined production.
Charles Chang, a finance professor at Fudan University in Shanghai, stated that Malaysia requires additional technology for purification, centrifugation—used to separate solids from liquids—and transportation to enhance its rare earths industry. According to Chang, Malaysia possesses the potential to grow this sector over the next two to four years.
However, Kassim pointed out that because China currently prohibits the export of refining technologies, this “severely restricts” the extent of collaboration between the two countries.
Despite advancements, Chinese manufacturers involved in wind energy and electric vehicle production continue to require access to rare earth elements, according to Jon Hykawy, president of Toronto-based consulting firm Stormcrow Capital, who noted that Malaysia’s resources could support this fast-growing sector.
“Such ionic clay reserves typically include a greater amount of precious and genuinely uncommon heavy rare earth elements, such as dysprosium and terbium, which play a crucial role in producing magnets for use in wind energy and vehicle industries,” he stated.
The government’s approach involves “accelerating” the development of the local rare earth supply chain. “Time is critical, as increased U.S.-China trade conflicts have opened up an opportunity for investment,” Kassim stated.
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The article was first published on the South China Morning Post (www.scmp.com), a top news outlet covering stories about China and Asia.
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