Highlights

• Malaysia aims to develop a domestic mine-to-magnet industry for non-radioactive rare earth elements.
• The initiative has the potential for GDP contributions and strategic global positioning.
• Significant challenges include:
  • Environmental concerns
  • Technical limitations
  • Potential technology dependency risks
• Success factors include:
  • Implementing clean chemistry
  • Establishing diversified technology partnerships
  • Setting enforceable standards
  • Building credible alternative rare earth processing capabilities

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Badhrulhisham Abdul Aziz (opens in a new tab), Centre for Sustainability of Ecosystem & Earth Resources (CSEER), Universiti Malaysia Pahang Al-Sultan Abdullah (UMPSA), with co-authors Mohd Yusri Mohd Yunus, Ahmad Noor Syimir Fizal, Mohd Amirul Mukmin Abdullah, and Nurul Ain Ismail (UMPSA/CSEER) report at the AIP Conference Proceedings, arguing that Malaysia can convert its non-radioactive rare earth elements (NR-REE) endowment—particularly heavy rare earths (HREEs) in ion-adsorption clays—into a domestic mine-to-magnet industry. But this assumes that the country executes on environmental safeguards, midstream capacity, and policy coherence.

Badhrulhisham Abdul Aziz, Lead Author

Source: ResearchGate

A Mission

Malaysia is trying to recast its rare earth endowment into a growth engine for the post-COVID economy, citing headline valuations of RM700–800 billion and positioning itself as a magnet for EV, wind, and electronics supply chains. The government has doubled down on a “value onshore” strategy, banning exports of unprocessed ore to force refining, alloying, and magnet manufacturing within its borders.

This vision leans on existing assets—Lynas Malaysia’s Kuantan plant, still the largest REE separation facility outside China—while courting downstream investment such as the Lynas–JS Link venture for sintered NdFeB magnets. At the same time, pilot projects across Kelantan, Perak, Pahang, and Kedah hint at heavy rare earth upside if ion-adsorption clay mining can be proven both clean and acceptable to local communities.

Limitations Are Real

But the glittering numbers mask significant limits. Much of the touted RM700–800 billion reflects in-ground resources, not bankable reserves, with economic recoverability constrained by grades, costs, environmental rules, and land-use restrictions. Malaysia’s record is mixed—Lynas’s Kuantan plant remains a lightning rod for waste and radiation concerns, underscoring how fragile community trust can be. The new raw export ban lacks full clarity on definitions and enforcement, leaving risks of leakage and stranded feedstock. Moreover, Malaysia’s limited technical base in ion-clay mining leaves it vulnerable to Chinese state-linked technology transfers that could entrench dependency unless balanced with Japanese, European, or Australian partnerships. Compounding matters, large shares of mapped deposits lie under protected forests, likely off-limits without policy shifts.

What Next

The implications are stark. If executed well, Malaysia could secure billions in GDP contributions, thousands of new jobs, and a strategic role as a non-China node for rare earth separation and magnet manufacturing, which would be valuable to U.S., Japanese, and European friend-shoring strategies.

Sequencing will matter—processing and magnets now, feedstock later—while proving environmental credibility on ion-clay mining will make or break heavy rare earth ambitions. Conversely, weak governance, poor community engagement, or over-reliance on Chinese know-how risks turning Malaysia into just another appendage of Beijing’s supply chain.

Rare Earth Exchanges (REEx) suggests that the stakes are clear: Malaysia has a window of opportunity to build trust, attract capital, and position itself as a credible global player—or see its ambitions stalled by the same forces that once hindered them.

Bottom Line (REEx View)

Malaysia has credible midstream assets and serious downstream intent. The upside case—heavy-REE clays plus magnets—requires clean chemistry, diversified tech partners, enforceable SOPs, and bankable offtakes. Get those right and Malaysia becomes a durable alternative hub; miss them and the narrative reverts to over-promising amid China’s continued dominance.

Source (study): Badhrulhisham Abdul Aziz et al., “Prospect of rare earth supply chain in Malaysia,” AIP Conference Proceedings 3225 (2025): 020008. doi:10.1063/5.0266259.

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