By A. Ananthalakshmi and Mai Nguyen
KUALA LUMPUR (Reuters) -Malaysia will develop a policy to ban exports of rare earth raw materials to avoid exploitation and loss of resources, Prime Minister Anwar Ibrahim said on Monday, making it the latest country to restrict shipments of key minerals.
Malaysia is home to just a fraction of the world’s rare earth reserves, with an estimated 30,000 metric tons, data from the United States Geological Survey in 2019 showed. China is the biggest source with an estimated 44 million tons of reserves.
The decision, however, comes as the world looks to diversify away from China, the world’s largest producer of the critical rare earth minerals that are used widely in semiconductor chips, electric vehicles and military equipment.
Anwar said the government would support the development of the rare earths industry in Malaysia and that a ban would “guarantee maximum returns for the country”.
He did not say when the proposed ban would come into effect.
The rare earth industry is expected to contribute as much as 9.5 billion ringgit ($2 billion) to the country’s gross domestic product in 2025 and create nearly 7,000 job opportunities, Anwar said in parliament.
“Detailed mapping of rare earth element sources and a comprehensive business model that combines upstream, midstream and downstream industries will be developed to maintain the rare earth value chain in the country,” he said.
Malaysia’s ban could affect sales to China, which imported about 8% of its rare earth ores from the Southeast Asian country between January and July this year, according to China customs data.
Earlier this year, China itself announced restrictions on exports of some metals used widely in the semiconductor industry, in a move seen as retaliatory measure for U.S. curbs on sales of technologies to China.
The curbs triggered fears that China could also limit exports of other critical minerals including rare earths.
Analyst David Merriman at Project Blue said the impact of a Malaysian ban was not immediately clear due to a lack of details, but a ban on rare earth ore could affect Chinese companies operating in Malaysia.
“The legislation could have some negative impacts on potential investment in Malaysia from Chinese parties, which have looked to other Asian nations to source unprocessed or mixed rare earth compounds as feedstock for (rare earth) processing facilities in southern China,” Merriman said.
Australia’s Lynas Rare Earths Ltd, the biggest producer of rare earths outside China, has a plant in Malaysia to process concentrate that it gets in Australia.
It was unclear if Malaysia’s planned export ban will impact Lynas, which did not immediately respond to a request for comment.
Malaysia has imposed restrictions on some of Lynas’ processing operations, citing concerns about radiation levels from cracking and leaching.
Lynas has disputed the allegations and has said it complies with regulations.
($1 = 4.6700 ringgit)
(Reporting by A. Ananthalakshmi in Kuala Lumpur and Mai Nguyen in Hanoi; Additional reporting by Rozanna Latiff in Kuala Lumpur, Melanie Burton in Melbourne and Amy Lv in Beijing; Editing by Edwina Gibbs and David Holmes)