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| The world's growing demand for rare earths and other critical minerals is creating a race among countries to exploit the minerals. (Source: AFP) |
The race heats up every day
There is a common thread in the recent moves by Indonesian President Joko Widodo, Chinese President Xi Jinping and Australia’s richest mining tycoon, Andrew Forrest. All of their moves are aimed at accelerating the global race to access critical minerals that are critical to the future of carbon neutrality and other cutting-edge technologies.
President Widodo wants access to Australia's lithium supply to supplement nickel supplies, hoping to turn Indonesia into a major electric vehicle battery producer and potentially develop a new auto industry.
Meanwhile, the Chinese government’s surprise announcement to restrict exports of gallium and germanium from August 1 is another clear indication that Beijing is willing to exploit its strengths in supplying critical minerals for strategic purposes.
With his company’s successful takeover of Mincor Resources, Forrest has once again shown his determination to seize a huge new opportunity in the mining sector: nickel rather than iron ore. He wants to develop Mincor’s nickel sulphide mines and plans to deploy further refining in Australia to serve the booming electric vehicle market.
Australia's path is less clear, despite the government's rhetoric and increased investment in major mining and mineral processing projects (often in collaboration with foreign partners).
Australia is already the world’s largest producer of lithium, third-largest producer of cobalt and fourth-largest producer of rare earths. Canberra’s “dream” needs to be much bigger and more expansive.
China - the country that "dominates the game"
The race between nations for critical minerals is accelerating. While Australia is blessed with abundant critical mineral reserves, this is no guarantee that the Labor government or its successor will be able to develop new industries on a large scale.
The critical minerals strategy released by Resources Minister Madeleine King last month described the potential more than it detailed practical steps.
In contrast, in China, the government has been focused on strategy for more than three decades. In the 1990s, China realized that it should focus its efforts on gaining growth advantage and boosting the supply of critical minerals, from mining to processing and manufacturing, which at that time was a low-value industry.
As the world belatedly realized, this “single-minded” approach by China has made it the dominant supplier of critical minerals, metals, and magnet materials that are the foundation of future industries.
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| Lithium is considered the “white gold” of the future. (Source: Getty) |
China produces more than 80% of the world's rare earths (the elements that are separated). Australia accounted for 53% of global lithium production in 2022 and exported 96% of that to the world's second-largest economy.
Meanwhile, the Northeast Asian country also accounts for more than 70% market share in the processing and production of other important minerals such as antimony, bismuth and tungsten.
For the West, being willing to accept Beijing's growing expertise and dominance seems to make commercial sense.
Australian lithium miners are just some of the beneficiaries, with exports rising to A$19 billion ($12.6 billion) by 2022, four times the 2021 level. But the overall strategy for Western nations is now looking increasingly risky, economically and in broader geostrategic terms.
That is why Western countries, including Australia, are rushing to develop the human, skills and technological resources to replace China, but they are still far behind. These countries remain vulnerable to any disruptions in supply from Beijing or other countries that could temporarily pressure the market to prevent competition.
Major concern
Beijing's recent announcement of sudden export restrictions on two important minerals and metals (that few people have ever heard of) immediately raised major concerns, and these concerns are spreading globally.
Neither gallium nor germanium nor their byproducts are traded in large quantities, but play a vital role in the production of high-speed semiconductor chips, with potential applications in defense, radio communications equipment and electric vehicles.
China's move is widely seen as another warning sign aimed at the United States as Washington tries to curb Beijing's access to advanced chipmaking equipment that is vital to economic growth and national security.
The Biden administration is considering further restrictions on the supply of electronic microchips to China and is urging its allies to adopt a similar approach.
The move seems to be no coincidence as Beijing's announcement came just ahead of a visit to China by US Treasury Secretary Janet Yellen.
The Australian government certainly has no intention of competing with the Biden administration’s multi-billion dollar investment plan to encourage greater domestic investment in renewable energy, including diversifying the supply of raw materials for critical mineral processing and rare earth refining.
Canberra's commitment to a $500 million loan through the Northern Australia Infrastructure Fund has had little impact on Washington's large-scale new projects.
Instead, the Australian Labor government hopes that its close relationship with the US, underpinned by the AUKUS trilateral alliance, will enable Canberra to be given priority as a supplier to the US domestic market as promised, which will also trigger greater levels of Washington investment in projects in the Oceanian nation.
The Australian federal government is being "ambiguous" about whether it will impose new restrictions on Chinese investment in its critical minerals sector, but Canberra has already imposed measures to stop businesses from the Asian nation investing in the sector.
However, the government of Western Australia, a state rich in natural resources, is confident of a new wave of critical minerals processing and manufacturing. The state is still very welcoming of Chinese investment and cooperation to create a new boom.
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