Global Efforts to Secure Critical Mineral Supply Chains
Representatives from over 50 nations, including G7 members and Australia, recently convened in Washington D.C. for a Critical Minerals Ministerial. The key objective was to strengthen and diversify global critical mineral supply chains, with a particular focus on reducing reliance on countries currently dominating the processing of these essential materials.
Simultaneously, Australia announced the establishment of a A$1.2 billion strategic reserve for critical minerals like antimony, gallium, and rare earths, aligning with international efforts to enhance supply chain resilience for clean energy, advanced technology, and defense applications.
International Ministerial Convenes in Washington D.C.
The inaugural Critical Minerals Ministerial, hosted by the United States, brought together ministers and representatives from a broad coalition of nations. Attendees included delegations from the G7 nations (United States, Britain, Japan, France, Germany, Italy, Canada), the European Union, Australia, New Zealand, India, South Korea, and Mexico. US Vice President JD Vance and Secretary of State Marco Rubio delivered opening remarks and engaged in various bilateral meetings.
The primary goal of the ministerial was to foster strategic alliances and accelerate the development of alternative supply chains for critical minerals. These materials are deemed vital for defense industries, artificial intelligence, modern technologies, and national security. A key proposal emerging from the initiative is the creation of a "club of nations" for trading critical minerals, aimed at establishing an alternative market with secure supply chains.
The G7 had previously agreed on an action plan in June to secure supply chains and boost their economies, with finance ministers holding a virtual meeting on the issue in December. Many G7 members currently exhibit significant dependency on rare earths supplies from China.
Australia Establishes Strategic Critical Minerals Reserve
The Australian federal government has established a A$1.2 billion strategic reserve for critical minerals. This initiative will initially concentrate on antimony, gallium, and rare earths, which are identified as crucial for clean-energy and high-technology manufacturing, as well as advanced military equipment, particularly within the AUKUS submarine context. The reserve's purpose is to secure rights to Australian-produced minerals, which will then be re-sold to meet international demand, especially from Australia's key allies.
The reserve includes $1 billion allocated for transactions, drawn from the expanded $5 billion Critical Minerals Facility, which provides government-backed loans and equity support for projects. An additional $185 million has been allocated for selective stockpiling and implementation costs. Federal Resources Minister Madeleine King indicated that new legislation will be introduced to implement the reserve, expanding the powers of Export Finance Australia, with the Department of Industry, Science and Resources overseeing strategic reserve transactions.
Larvotto Resources, a WA-based company, holds Australia's largest antimony mineral resource at its Hillgrove project in New South Wales. The company anticipates commencing production by mid-year and expects to be Australia's sole antimony producer within six months. At full production, the operation is projected to produce approximately 5000 tonnes of antimony annually, contributing 5 to 7 percent of the global mine supply over an initial eight-year mine life.
Australia possesses substantial critical mineral reserves, including rare earth projects like Lynas' processing facility in Kalgoorlie. While Australia currently has no major gallium production, it can be extracted during the bauxite-to-alumina refining process. Australian Treasurer Jim Chalmers promoted this reserve during his visit to Washington D.C.
Addressing Global Supply Chain Dynamics and China's Dominance
Western nations are actively working to decrease their reliance on China, which maintains a dominant position in the global critical minerals supply chain. Data from the International Energy Agency and the US government highlights China's extensive control:
- Approximately 90% of the world's rare earths are refined in China.
- China refines 48% of global antimony, 98% of gallium, 68% of nickel, 40% of copper, 59% of lithium, and 73% of cobalt.
- China also holds 60% of the world's rare earth minerals and thousands of patents for processing technologies.
China has historically implemented export controls on rare earths, including restrictions in 2023 on various metals, and has previously restricted exports to countries like Japan following geopolitical tensions or tariff disputes. Concerns have been raised that "foreign supply" can flood markets, causing prices to plummet and potentially making new critical mineral projects economically unviable.
Despite these concerns, US Treasury Secretary Scott Bessent noted that China is currently fulfilling commitments to purchase US soybeans and ship critical minerals to US firms. Chinese officials have also stated their willingness to continue active efforts in critical mineral supply chains.
Key Critical Minerals and Their Strategic Applications
Critical minerals are nonfuel minerals essential for modern technologies that often lack readily available alternatives. Their applications span various sectors, including defense industries, semiconductors, renewable energy components, batteries, smartphones, automobiles, household appliances, and advanced manufacturing.
The minerals initially selected for Australia's reserve—antimony, gallium, and rare earths—are vital for "dual-use" technologies, serving both civilian and military applications:
- Antimony: Utilized in solar panels, as a fire retardant, a metal hardener (particularly with lead), military lead products, household and commercial batteries, and night vision equipment. Global production has seen declines due to the depletion of surface deposits over decades.
- Gallium: A key component in integrated circuits, optical devices, advanced semiconductors (used in radar systems and telecommunications), and solar panels.
- Rare earths: A group of 17 elements crucial for high-performance permanent magnets used in electric vehicles, renewable energy generators, fighter jets, MRI machines, and other electronics.
Mechanisms, Challenges, and International Stockpiling
Discussions at the ministerial included calls for the US to guarantee a minimum price for critical minerals and rare earths to reduce investor risks and ensure diversified supplies. However, reports indicated the US decided against this idea, which led to a decrease in shares for Australian mining companies. Australia, a significant rare earth producer, advocates for a price floor. The US proposes implementing adjustable tariffs to set minimum prices within member countries, aiming to prevent other nations from undermining local projects with underpriced products.
The Australian strategic reserve aims to enhance Western competitiveness in establishing "offtake agreements," which secure minerals, sometimes before mining commences, allowing buyers to sell them to international allies. Critical minerals mining and processing require substantial public and private investment, often utilizing financial tools like export credits.
Environmental considerations are a significant factor, as critical mineral mining, particularly for rare earths, can have substantial environmental impacts and produce toxic waste. While some initiatives aim to accelerate and streamline permitting processes, projects can still take many years from discovery to production. Challenges also include China's continued dominance in processing due to advanced knowledge, skills, and technology, as well as market volatility, as seen with lithium mining.
Beyond Australia's reserve, other nations are establishing or reinforcing stockpiles. US President Donald Trump reportedly announced Project Vault, a new strategic minerals stockpile for the US, to be supported by $2 billion in private capital and a $10 billion loan from the US Export-Import Bank. Japan, South Korea, and the European Commission also have initiatives for stockpiling and diversifying critical raw materials.
Bilateral and Multilateral Engagements Navigate Complex Geopolitics
In October, a framework for critical minerals and rare earths was signed, with sources indicating this agreement was between Prime Minister Anthony Albanese and US President Joe Biden. One source, however, attributed the agreement to Prime Minister Anthony Albanese and US President Donald Trump. This framework committed both countries to investing in related projects. Australia, with the world's fourth-largest rare earth reserves, granted access to its resources in exchange for investment, though its reserves are smaller than China's. US Treasury Secretary Scott Bessent met with Australian Treasurer Jim Chalmers to discuss these matters. US Secretary of State Marco Rubio held bilateral meetings with the foreign ministers of South Korea and India.
Following its agreement with the US, Australia has received interest from Europe, Japan, South Korea, and Singapore. The US and Mexico announced an action plan to identify critical minerals and explore border-adjusted price floors. The European Union and Japan will also begin developing their own action plans with the US. Frameworks and memorandums of understanding were signed with Argentina, the Cook Islands, Ecuador, Guinea, Morocco, Paraguay, Peru, the Philippines, the United Arab Emirates, and Uzbekistan.
Some countries are reportedly cautious about placing full trust in US initiatives and are exploring increased cooperation with China. On the same day as the Washington talks, US President Donald Trump reported a phone call with Chinese President Xi Jinping discussing trade and other issues, describing their relationship as "extremely good." Reports indicated President Trump was scheduled to meet President Xi in China in April.
The European Union is expected to advocate for the US to withdraw new global steel derivative tariffs, which they consider a breach of an August deal. The Trump administration had previously threatened a second list of such tariffs.