The Malaysian Insider | June 30, 2011

KUALA LUMPUR, June 30 — The controversial Lynas rare earths refinery in Kuantan is plagued by environmentally hazardous construction and design problems, the New York Times has reported, citing internal memos and current and former engineers on the project.

The report published today said the issues, including moisture in humid Malaysia, could potentially affect the RM700 million Lynas Corp plant being built to challenge China’s stranglehold in the key rare earths industry.

Malaysia is due to announce today the results of an independent international review of the plant that is scheduled to open this September. The listed Lynas Corp has asked for a halt in its share trading in Australia today pending the report.

In a report headlined “The Fear of a Toxic Rerun” by Keith Bradsher, the New York Times reported that Lynas officials contend that the refinery being built here is safe and up to industry standards, and say that they are working with its contractors to resolve their concerns.

“All parties are in agreement that it is normal course of business in any construction project for technical construction queries to be raised and then resolved to relevant international standards during the course of project construction,” wrote Matthew James, an executive vice-president of Lynas, in an e-mail last night.

But the construction and design may have serious flaws, the engineers told New York Times, and provided proof through memos, e-mail messages and photos from Lynas and its contractors. The engineers said they felt a professional duty to voice their safety concerns, but insisted on anonymity to avoid the risk of becoming industry outcasts.

“The problems they detail include structural cracks, air pockets and leaks in many of the concrete shells for 70 containment tanks, some of which are larger than double-decker buses,” the paper said.

Lynas is mining rare earths ore deep in the Australian desert and shipping to Malaysia to be mixed with powerful acids to make a slightly radioactive slurry that would be pumped through the tanks, with operating temperatures of about 200 degrees Fahrenheit.

The engineers say that almost all of the steel piping ordered for the plant is made from standard steel, which they describe as not suited for the corrosive, abrasive slurry. Rare earths refineries in other countries make heavy use of costlier stainless steel or steel piping with ceramic or rubber liners, the paper said.

“The engineers also say that the concrete tanks were built using conventional concrete, not the much costlier polymer concrete mixed with plastic that is widely used in refineries in the West to reduce the chance of cracks.

“Documents show that Lynas and its construction management contractor, UGL Ltd of Australia, have argued with their contractors that the cracks and moisture in the concrete containment walls are not a critical problem,” according to the report.

Memos also show that Lynas and UGL have pressed a Malaysian contractor, Cradotex, to proceed with the installation of watertight fibreglass liners designed for the containment tanks without fixing the moisture problem and with limited fixes to the walls. But Cradotex has resisted, the paper reported.

“These issues have the potential to cause the plants critical failure in operation,” Peter Wan, the general manager of Cradotex, said in a June 20 memo obtained by New York Times.

“More critically the toxic, corrosive and radioactive nature of the materials being leached in these tanks, should they leak, will most definitely create a contamination issue.”

Wan said in a telephone interview with the New York Times on Tuesday that he believed Lynas and UGL would be able to fix the moisture problem but that he did not know what method the companies might choose to accomplish this.

The fibreglass liners are made by AkzoNobel of Amsterdam, one of the world’s largest chemical companies. AkzoNobel says it, too, worries about the rising moisture.

“We will not certify or even consider the use of our coatings if this problem can’t be fixed,” Tim van der Zanden, AkzoNobel’s top spokesman in Amsterdam, wrote on Monday night in an e-mail reply to questions.

Memos show that the refinery’s concrete foundations were built without a thin layer of plastic that might prevent the concrete pilings from drawing moisture from the reclaimed swampland underneath. The site is located just inland from a coastal mangrove forest, and several miles up a river that flows out to the sea past an impoverished fishing village.

An engineer involved in the project said that the blueprints called for the plastic waterproofing but that he was ordered to omit it, to save money. The plastic costs US$1.60 (RM4.80) a square foot, he said.

Lynas disputes that the design ever called for using the plastic.

Nicholas Curtis, the executive chairman of Lynas, said in a telephone interview from Sydney on Monday that the project here met local environmental standards and that he believed those were consistent with international standards.

“I have complete confidence in the Malaysian environmental standards and our ability to meet the requirements,” he told the New York Times.

Engineers at the project said that Lynas officials had whisked the international inspectors through the factory in a single morning, partly because of security concerns about protesters outside the refinery gates. The team had little chance to examine the refinery’s structure, the engineers said.