Australia provides financial assistance to Trafigura smelters in an effort to safeguard essential minerals
In an effort to establish Australia as a significant non-Chinese supplier for global defence and energy industries, the government is implementing a strategy to develop a new supply chain for critical minerals. This move comes amidst pressure to help the country's struggling metals smelters due to high energy costs, lower market prices, and competition from Chinese rivals.
One of the key conditions for the bailout of Trafigura's lead and zinc smelters is the development of a new supply chain for critical minerals. The federal government, along with the state administrations of South Australia and Tasmania, will provide A$135mn ($87mn) to prevent the collapse of the country's only lead smelter in Port Pirie and the largest zinc smelter in Australia, located in Hobart. These funds will be used for modernising the smelters, with a focus on producing critical minerals from byproducts.
Huw McKay, a visiting fellow at the Australian National University, has emphasised the need for the government to ensure that funds provided to smelters are conditional on the owners liberating byproducts such as antimony and germanium, which have been left in the slag due to cost competition with China. These byproducts, although small in volume, could be highly impactful from a national resilience perspective. Antimony is used in the production of armour piercing ammunition and night vision goggles, while germanium is used in the production of semiconductors.
Australia's strategy to diversify its critical minerals supply chain includes a price floor mechanism, strategic industrial policy, partnerships and investment, global supply chain resilience, and multilateral initiatives. The price floor mechanism aims to provide price certainty for producers and investors, reducing market volatility and potential manipulation. This initiative, backed by a A$1.2 billion strategic minerals reserve, combines stockpiling with price stabilization to secure immediate supply and encourage sustainable production over the long term.
The strategic industrial policy represents an evolution to treat critical minerals as essential to national security and economic resilience, providing regulatory certainty without imposing blanket subsidies. Australia collaborates internationally, notably with India through the Critical Minerals Investment Partnership, facilitating joint development of projects and local processing infrastructure like the Kwinana Cobalt Refinery. Indian investments in Australian lithium projects also secure diversified supply access outside of China.
By leveraging its vast unexploited mineral deposits and secure, transparent regulatory environment, Australia positions itself as a reliable alternative to China-dominated supply and refining chains. For example, China currently refines about 70% of the world's lithium, a dependency Australia seeks to diminish through enhanced domestic processing capabilities and export off-take agreements.
The aim of these strategies is to underpin the viability of projects and break China's grip on the strategic sector. The critical minerals to be produced include antimony and bismuth at Port Pirie, and germanium and indium at Hobart. South Australia's premier, Peter Malinauskas, has emphasised the importance of using taxpayer funds to secure Australia's national security, particularly in the current geostrategic environment.
Australia is part of broader efforts such as the Quad Critical Minerals Initiative, which aligns policies, harmonizes standards, and fosters coordinated procurement among key allies. This cooperation aims to dismantle bottlenecks caused by fragmented policies and reduce capital risks by pooling governmental and private financing.
References: [1] Australian Government (2022). Critical Minerals Strategy. Retrieved from https://www.industry.gov.au/critical-minerals [2] Australian Government (2022). Australian Critical Minerals Processing Program. Retrieved from https://www.industry.gov.au/critical-minerals/programs/australian-critical-minerals-processing-program [3] Australian Government (2022). Australia-India Critical Minerals Investment Partnership. Retrieved from https://www.industry.gov.au/critical-minerals/international/australia-india-critical-minerals-investment-partnership [4] Quad (2022). Quad Critical and Emerging Technology Working Group. Retrieved from https://www.quad.gov/quad-critical-and-emerging-technology-working-group/ [5] Australian Government (2021). Strategic Resources Reserve. Retrieved from https://www.industry.gov.au/critical-minerals/programs/strategic-resources-reserve
- The modernisation of the lead and zinc smelters, funded by the federal government, will not only help these struggling industries but also focus on producing critical minerals like antimony and germanium, which are essential for the production of armour piercing ammunition, night vision goggles, semiconductors, and other strategic items.
- In an unexpected turn, the byproducts left in the slag due to cost competition with China could become a significant asset to Australia's national resilience, as they are key components in the production of critical minerals that could challenge China's dominance in the global supply chain.
