Last week, Australia’s Lynas Rare Earths produced heavy rare earth elements (HREEs) at a commercial scale in Malaysia, marking the first time this has ever happened outside of China.
This breakthrough, which includes elements like dysprosium and terbium, is no small feat in a market dominated by China, which is responsible for around 60% of global rare earth production and virtually 100% of the world’s HREE supply.
Rare earth elements (REEs) are critical for the US and other advanced economies: they power technologies from electric vehicles to defense systems. The US Department of Defense, for instance, has identified HREEs as vital for missile systems, radar and advanced communications.
Yet, the US itself produces only about 12% of global REEs—and almost none of the heavy types. Without secure access to these materials, Western industries risk supply chain disruptions that could slow the clean energy transition and compromise national security.
It is for these reasons that the US recently signed an agreement with Ukraine to secure preferential access to its mineral resources—including, notably, REEs—in exchange for establishing a Ukraine reconstruction fund, as well as certain payback for the estimated US$150 billion the US has provided Ukraine since the war started.
However, a significant portion of Ukraine’s known REE reserves lies in the Donetsk region, which remains under Russian control, highlighting the fragility of relying on politically contested sources.
In this context, Lynas’ progress is not just a technical achievement but a geopolitical shift. It positions not only Malaysia, but also Southeast Asia, as a key hotspot for the future of sourcing REEs.
Until recently, there were few incentives to produce REEs in the region. But market shifts, the strategic push for supply chain diversification and the growing capacity of Southeast Asian countries to process REEs domestically promise to unlock vast potential.
Vietnam, in particular, holds some of the world’s largest REE reserves—estimated at around 3.5 million tonnes (with some sources suggesting as much as 20 million tonnes), nearly twice the size of US reserves.
Yet its production today is negligible, representing less than 1% of global output. Major deposits in the country’s northwest, such as Dong Pao and Nam Xe, remain largely untapped, while significant areas across the country are still unexplored.
Still, Southeast Asia’s potential REE suppliers face substantial challenges: (1) environmental concerns, notably the management of radioactive byproducts like thorium; (2) a lack of technical expertise and processing infrastructure, with China still controlling key separation technologies; and (3) market and geopolitical pressures, as these countries navigate a landscape dominated by Chinese pricing power, potential retaliation and complex export dynamics.
If Southeast Asia—especially Vietnam and Malaysia—can overcome these challenges, the region could emerge as a critical node in global REE supply chains, offering the US, Europe, Japan and others an alternative to China’s near-monopoly.
However, this will require more than favorable geology; it demands investment in refining capacity, strict environmental standards, and strategic partnerships that ensure technology transfer and long-term market access.
For the West, the stakes are clear: support Southeast Asia’s rare earth ambitions—or remain perilously dependent on a single Chinese supplier.
Patricio Faúndez is country manager at GEM Mining Consulting
