Rare Earth Plant in Malaysia May be Closer to Opening

The Lynas Kuantan plant

High Chinese prices, electoral situation, western scarcity of rare metals become factors
(Asia Sentinel) An Australian-owned rare earths processing facility in Malaysia that is reported to be the world’s biggest outside China, which has been delayed by environmentalists and opposition political leaders, may well be gathering enough steam to open by the end of the year, say several sources in Kuala Lumpur.

The plant, to be located near the east coast city of Kuantan, was not expected to open until after snap national elections that some political observers said might be called late this year. It now looks like the elections will be delayed, however, until at least March of next year and possibly into 2013 when the current parliamentary term ends, partly because of infighting within the United Malays National Organization, partly because inflation is rising and because the economic situation in the developed countries could spell trouble for Malaysia’s exports.

Now, although there has been no definite word, the government may give the plant the go-ahead with or without waiting for the elections, the well-placed sources say. The Pahang state seat in which the plant lies is expected to go to the opposition in any case, and the feeling is that with the election that far away, much of the public anger over the opening will have dissipated by the time the polls roll around.

The facility is to be operated by Lynas Malaysia Sdn. Bhd., a subsidiary of the publicly traded Lynas Corp of Australia. It has been in limbo at a time when rare earths are skyrocketing in price. China, which supplies 95 percent of the world’s supply, has cracked down on illegal operators and is attempting to clean up its landscape. That has caused China to cut its exports by 35 percent or more.

The New York Times reported on Sept. 15 that the average price for fluorescent light bulbs in the United States has risen by 37 percent this year because of a shortage of elements such as Yttrium, Europium and Terbium, which are known as phosphors and are refined and processed to produce fluorescent and compact fluorescent bulbs. As rare earths are also used in a wide range of computer, cellphone and tablet products as well as wind turbines and electric motors, the price rises are wreaking financial damage on western companies forced to buy them at China’s price.

Thus the global need for increasingly scarce materials is putting added pressure on Malaysia to open the plant.

Karen Yap, a Kuala Lumpur-based spokeswoman for Lynas, said the Kuantan plant is on track to become operational before the end of the year. However, she said, Lynas will not comment on the political situation surrounding the plant. Environmentalists and Malaysia's opposition parties, particularly the Democratic Action Party, have been warning that the plant has the potential to create serious environmental and public health problems.

Rare earths mining and processing is difficult, expensive and rarely ecologically friendly. It produces enormous quantities of wastewater, requires vast amounts of energy, uses toxic materials in the refining process and can produce radioactive materials with half-lives of hundreds of years. The United States closed its rare earths mining operations in California’s Mojave Desert in the 1990s because of the environmental cost. They are now being reopened.

Malaysia is particularly sensitive to the issue. In the 1980s, Mitsubishi Chemical established a plant in an area called Bukit Merah west of Ipoh. For the last two decades, both Mitsubishi and Malaysia have paid the price in terms of deaths of workers from leukemia and environmental cleanup that so far has cost US$99.2 million and still hasn’t been completed.

That environmental disaster thus laid the foundations for the current opposition to the Kuantan plant – which will only process materials shipped from Australia, not mine them domestically. Lynas Malaysia says it plans to import rare earth ore from Mount Weld in Western Australia, said to be the richest rare earth deposit on the planet, truck the ore to Fremantle, send it by containership to Kuantan, then process it at a RM700 million (US$231.9 million) facility at the Gebing Industrial Estate nearby in Pahang state.

Prime Minister Najib Tun Razak and other government officials have continued to insist the plant won’t open until all safety and environmental concerns are met.

Despite professions of electoral strength by Barisan Nasional leaders, it is unsure at this point just how strong the government’s position is. The Malaysian Chinese Association, the second-biggest party in the national coalition, is in an absolute shambles because of political infighting and charges of corruption. Despite Najib’s attempts to woo the Chinese back, the widespread feeling in Kuala Lumpur is that the Barisan has lost the Chinese, the country’s second biggest ethnic group, to the opposition Democratic Action Party for the foreseeable future.

Also many urban ethnic Malays are said to have aligned themselves with Parti Keadilan Rakyat, the party headed by Opposition Leader Anwar Ibrahim. A heavy-handed crackdown by authorities on a July rally and march demanding electoral reform is said to have alienated much of the urban public as well.

Thus, Barisan leaders are reluctant to court electoral trouble, especially on the eastern seaboard which is the home of the rural ethnic Malays who make up the backbone of UMNO support. Party leaders believe they must obtain the votes of most of the Malays for the coalition to survive.

As to the plant itself, commissioning is expected to be completed and production is supposed to begin by the end of the year, according to Ms Yap, of Ogilvy public Relations Worldwide, which functions at Lynas’s spokesman. Some regulatory approval is necessary for a pre-operational license. “However, there is a conclusive path following the release of the IAEA independent report and the Malaysian Government's clear announcement of implementing recommendations within the report,” according to a prepared release. “The required plans and an updated Radiation Impact Assessment (RIA) were submitted on 18 July 2011, and Lynas' submission of the Safety Case to the Atomic Energy Licensing board is imminent.”

A pre-operating license typically covers the first two to three years of operation. A full operational license isn’t granted until the plant has been fully operational for some time. Ogilvy called this standard engineering practice.