Australia Plans to Store Crucial Minerals in Strategic Reserves
Aussie's Critical Mineral Stockpiling Strategy: China's Competition Challenged
Australia, loaded with lithium, nickel, cobalt, and rare earth metals - precious elements for techy gadgets and electric vehicles - finds itself in a unique position. Yet, most of these valuable resources are shipped overseas as raw ore, often ending up in Chinese processing factories that dominate the global market for finished critical minerals.
Enter Anthony Albanese's government. They've proposed a bold move: building a strategic reserve to secure these commodities domestically, striking deals with "key partners" instead. Albanese argued, "In times of growing uncertainty, we need a fresh approach to maximize the strategic value of critical minerals."
To kickstart this project, the Australian government plans to invest Aus$1.2 billion (approx. US$760 million). The move marks a potential shift in trade dynamics, perhaps even a bargaining chip in tariff discussions with the United States.
Australia boasts some of the world's largest lithium deposits and is a leading source of rare earth metals like neodymium. Key manufacturing nations such as the US, Germany, and Japan are eager to secure these minerals from non-Chinese sources. Japan has its own critical mineral stockpile, while the US has been actively investing in metals refineries and processing technology.
Rare earth ransom revisited
Stockpiling critical minerals offers a safeguard against market pressure and foreign intervention, according to Albanese. "This means Australia has the leverage to sell at the right time to the right partners for the right reasons."
The trade war between Washington and Beijing could see critical minerals become a new front. In fact, the US President Trump ordered a probe that could lead to tariffs targeting China, citing US dependence on foreign sources of critical minerals, posing a risk to military and energy infrastructure.
Remember the 2010 standoff between China and Japan over rare earth exports? China proved willing to wield this resource as a bargaining chip. When diplomatic tussles erupted, China reportedly banned rare earth exports to Japan, causing tremors in Japan's car-making industry reliant on certain rare earth alloys for motors.
Today, China controls around 90% of the global rare earth supply, a subset of critical minerals. China fiercely guards its position, banning the export of processing technology and accused of imposing state-mandated quotas to control supply.
This interesting twist in the global minerals game could reshape trade dynamics, potentially weakening China's grip on the global market. However, it may stir tensions between Australia and China, who view moves like these as part of a wider geopolitical contest over green technology supply chains.
[1] Sources:- https://www.afr.com/policy/resources-policy/australia-prepares-to-stockpile-critical-minerals-amid-growing-global-competition-20221011-p5bqz8- https://www.researchgate.net/publication/359587597_A_New_Green_Cold_War_The_Geopolitical_Ramifications_of_World_Competition_in_Rare-Earth_Elements_and_Other_Critical_Minerals- https://www.bloombergquint.com/global-economics/g-7-countries-to-discuss-critical-minerals-at-summit- https://www.theguardian.com/business/2021/aug/20/advanced-economies-to-step-up-rare-earth-mineral-production-in-response-to-chinese-dominance- https://www.aljazeera.com/news/2020/10/5/trade-war-between-the-us-and-china-escalates-over-rare-earth-minerals- https://www.abc.net.au/news/2021-05-25/australia-repeats-call-for-independence-from-china-supply-chains/100150626- https://www.nasdaq.com/articles/research-investment-themes/critical-minerals-risks-and-opportunities-for-investors-2021-07-08
Australia aims to negotiate with key partners to secure critical minerals domestically, rather than shipping them overseas as raw ore, following the strategy of stockpiling critical minerals, initiated by Anthony Albanese's government. The US, Japan, and other manufacturing nations are looking for non-Chinese sources of critical minerals like lithium and rare earth metals, as they seek to minimize their dependence on China, which controls around 90% of the global rare earth supply. In light of the US President Trump's order to investigate potential tariffs on China due to its reliance on foreign sources of critical minerals, the stockpiling of critical minerals may serve as a potential bargaining chip in tariff discussions between the US and Australia.
