Journalism of Courage
The deal to develop critical mineral supply chains between the United States and Australia is not quite the game-changer needed to end Western reliance on China, but it is an important first step.
US President Donald Trump and Australian Prime Minister Anthony Albanese inked a deal on Monday in Washington that will see up to $8.5 billion invested in projects to develop and refine metals vital to industries including defence, advanced manufacturing and the energy transition.
The agreement was touted by the White House in a fact sheet that was headlined: “Achieving critical mineral and energy dominance.”
It’s safe to dismiss that as political spin and hyperbole given China’s dominance of most of the global critical mineral supply chains.
China currently produces about 90% of refined rare earths, more than 90% of graphite, just under 80% of cobalt and nearly 70% of lithium.
Its share of nickel is considerably less, but if its control of Indonesian nickel refining is added to what is produced in China, around 70% of refined nickel is under Chinese control.
However, the US-Australia agreement does show that Western governments are starting to take steps to reduce their reliance on China, and are also prepared to spend capital to achieve these aims.
The concrete first steps in the deal include seven letters of interest for $2.2 billion of investments by the US Export-Import Bank.
The recipients of the letters include Arafura Rare Earths , which is building a mine in Australia’s Northern Territory, and Sunrise Energy Metals, which is developing a scandium project and a nickel-cobalt venture, both in New South Wales state.
The agreement also includes assistance to US aluminium producer Alcoa to build a gallium plant alongside its alumina refinery in Western Australia that could provide up to 10% of global gallium, a metal used in semi-conductors.
News of the Australia-US deal was enthusiastically greeted at the IMARC conference that started on Tuesday in Sydney, with numerous speakers and delegates at one of the world’s largest mining events saying it was recognition that the Western world has to do more to catch up to China’s dominance in refined metals.
But there was also realism with one delegate comparing the deal to a 400-metre running race, saying China was already three-quarters of the way around the track and the West was just placing its starting blocks.
Even if more money is committed to developing mining projects and the mid and downstream processing of ores, it would take years to wean Western buyers off Chinese suppliers.
Then there is the question of costs as it’s unlikely that even with cheap government capital that projects in countries such as Australia could produce refined metals at prices competitive to those made by China.
This means Western governments and manufacturers will have to be prepared to pay more to secure supply chains that don’t touch China.
This could be done through a variety of methods, such as lowering the cost base of Western companies by deferring mineral royalties or offering tax benefits, or by imposing tariffs on imports of Chinese-sourced material.
When the challenge of funding, building and sustaining critical mineral supply chains outside of China is considered in its entirety, it becomes clearer that the agreement signed by Trump and Albanese is barely enough to shift the needle.
It may well be the harbinger of bigger deals and commitments, especially if it ushers in an era where public-private partnerships can accelerate the development of mines and refineries.
