An Australian miner racing to break China’s global stranglehold of rare earths says the Asian powerhouse is manipulating resource prices, posing an “existential threat” to Western countries.

Chinese Premier Li Qiang capped his visit to Australia last Tuesday at a lithium processing plant in resource-rich Western Australia, marking China’s push to retain control of the world’s critical minerals and rare earths.

Around the same time, the boss of $2.7 billion ASX-listed Iluka Resources, Tom O’Leary, was warning participants at a global mining conference in Japan about the “uncomfortable reality” behind China’s superiority.

“China’s dominance of the rare earths supply chain has led to market failure, and this presents an existential threat to manufacturing in Western and like-minded countries,” O’Leary said.

Beijing’s monopoly of rare earths is being leveraged to control prices, O’Leary maintains. He said that significant price swings on the Asian Metal index over the past three and a half years indicate the price is being manipulated by China.

“Most telling is the price fall, from the peak in early 2022, which occurred almost immediately following what was effectively a Chinese government directive to its rare earth firms to ‘jointly guide product prices to return to rationality’,” he said.

Independent forecasters point to a future supply squeeze and rising prices, yet Asian Metal index prices for rare earths remain at historic lows. At today’s index prices, no producer, regardless of location, is making any money, O’Leary said.

China makes more than 90 per cent of the world’s rare earth oxides and monopolises the global supply of two heavy rare earth elements – dysprosium and terbium. It can extract profits anywhere along the supply chain.

Both elements are used to make high-strength magnets for thousands of defence applications, electric motors and drivetrains in wind turbines.