This article outlines opportunities and challenges in Australia’s development to become an integral part of the international critical minerals supply chain. Critical minerals are important as they are essential in the construction of sustainable energy technologies that will be necessary to achieve net-zero emissions by 2050. To become one of the main suppliers of critical minerals Australia needs to attract investments and challenge China’s dominant position in the downstream of critical minerals.
By Megan Zutt
Introduction
According to its Critical Minerals Strategy of 2022, Australia aims to turn into the “global critical minerals powerhouse” by 2030 by becoming an integral part of the international critical minerals supply chain [1]. Critical minerals can be identified as “metals, non-metals and minerals that are considered vital for the economic well-being of the world’s major and emerging economies, yet whose supply may be at risk due to geological scarcity, geopolitical issues, trade policy or other factors” [3]. To establish net-zero carbon emissions by 2050 and to ensure global warming will not exceed 1.5 degrees, a goal set out in the Paris Climate Pact [2], critical minerals will be essential. They include, but are not limited to, copper, cobalt, nickel, lithium, and rare earth minerals, which are vital in the construction of wind turbines, solar panels, batteries, and improved energy storage [4]. In the report The Role of Critical Minerals in Clean Energy Transitions [5], the International Energy Agency predicts the demand for critical minerals will quadruple by 2040 if states adhere to the goals of the Paris Agreement. Australia has great potential to contribute to filling this gap as it is the largest supplier of nickel, rutile, tantalum, and zircon, and has important reserves of cobalt, lithium, copper, antimony, niobium, and vanadium [6]. Even though Australia is still very reliant on fossil fuels, with coal being its second-biggest export commodity [7][8], the newly elected government has committed to accelerating the reduction of greenhouse-gas emissions [9]. The detrimental effects of climate change hitting Australia in the form of extreme temperatures, floods and forest fires have incentivized the country to invest more in critical minerals mining projects to support the global transition to a green economy. In its journey to becoming a main player in the international critical minerals supply chain, it is subject to both opportunities and challenges.
Opportunities
In addition to the high level of reserves of critical minerals in the country, Australia’s potential to become one of the main suppliers of critical minerals is also related to its reputation of being a reliable partner and supplier [10]. This is partly due to the fact that Australia is one of the few countries with significant critical mineral reserves without middle to high levels of fragility and corruption [11]. Moreover, Australia has a developed economy; a progressive mining equipment, technology, and services industry; a highly skilled labour force; and noteworthy environmental, social, and governance (ESG) standards [12]. However, the most important drivers are of a geopolitical nature. China currently controls most of the supply of critical and rare earth minerals and has shown its willingness to use this power to advance political goals, which can be demonstrated by the 2010 rare earth minerals embargo on Japan. Many countries, mostly Western states, want to undermine China’s global market dominance by partnering with more reliable suppliers such as Australia [13]. Accordingly, the Australian Government has received investments from Japan, signed memorandums of understanding with Japan, India, and the Republic of Korea, and can expect a closer partnership with the United States in the near future [14][15]. Additionally, binding and non-binding commercial agreements are being initiated with public and private trade partners worldwide. Moreover, intergovernmental initiatives and working groups to support and share knowledge on critical mineral mining are being established, in which Australia plays an important role [16]. These domestic and international factors give Australia the opportunity to become a leading actor in the critical minerals supply chain by 2030. Yet, this development will not be without its challenges.
Challenges
The most significant challenge for Australia will be competing with China, which is currently the main supplier of critical minerals. Even though China does not dominate the upstream (extraction) for critical minerals, it does control the downstream (production and distribution). For instance, it refines 73% of the world’s cobalt, 59% of lithium, 68% of nickel and 40% of copper [17]. China has created this dominance through worldwide investments in the critical minerals industry, including in Australia [18]. Moreover, it will be hard to economically compete with China due to Australia’s ESG standards and higher labour costs [19]. However, Australia’s commitment to a sustainable mining process might also attract investors that want to minimise environmental and social harm. To attract more investors, public and private, the market size of critical minerals in Australia needs to grow, as it is still very minimal compared to coal and iron ore [20]. To promote the critical minerals industry, Australia initiated the AU$2 billion Critical Minerals Facility, which provides loans to the mining sector, and has committed to invest AU$21 billion in low emissions technologies, in which critical minerals play a vital role [21]. However, apart from being costly, the construction of new mines is time-consuming. The average construction phase of a mine takes four to five years, whereas the duration of the whole process from discovery to production lasts an average of 16 years [22]. Therefore, before new mining projects are up and running, let alone profitable, 2030 will already be around the corner [23].
Conclusion
Both the COVID-19 pandemic, which revealed the vulnerabilities of international trade, and the war in Ukraine, which exposed the risks of relying on a small number of energy suppliers, have provided a push for international actors to focus on renewable energy sources [24][25]. In combination with the consequences of climate change becoming increasingly more evident, a stable supply of critical minerals, which are deemed essential in the construction of sustainable energy technologies, is crucial. Australia wants to fill this gap by investing in sustainable critical minerals mining projects and by showing the world it is a reliable supplier. Even though there is still a long way to go before Australia comes close to China’s downstream dominance of critical minerals, with the right mindset Australia can advance from a supporter of fossil fuel projects to an advocate of the critical minerals industry, which will bring us one step closer to achieving net-zero emissions by 2050.
References
[1] Australian Government Department of Industry, Science, Energy and Resources. 2022 Critical Minerals Strategy, March 16, 2022, 7, https://www.industry.gov.au/data-and-publications/2022-critical-minerals-strategy
[2] United Nations Framework Convention on Climate Change. The Paris Agreement, 2015, 3, https://unfccc.int/sites/default/files/english_paris_agreement.pdf
[3] Australian Trade and Investment Commission. Australian Critical Minerals Prospectus 2021, December 2021, 3, https://www.austrade.gov.au/news/publications/australian-critical-minerals-prospectus-2021
[4] International Energy Agency, “Critical Minerals,” accessed September 6, 2022, https://www.iea.org/topics/critical-minerals
[5] International Energy Agency. The Role of Critical Minerals in Clean Energy Transitions, May 2021, https://www.iea.org/reports/the-role-of-critical-minerals-in-clean-energy-transitions
[6] Mohan Yellishetty, “Australia has rich deposits of critical minerals for green technology. But we are not making the most of them … yet,” The Conversation, May 11, 2022, https://theconversation.com/australia-has-rich-deposits-of-critical-minerals-for-green-technology-but-we-are-not-making-the-most-of-them-yet-182331
[7] Australian Government Geoscience Australia, “Energy,” accessed September 6, 2022, https://www.ga.gov.au/scientific-topics/energy/overview
[8] Frances Mao, “Climate change: Why Australia refuses to give up coal,” BBC, October 22, 2021, https://www.bbc.com/news/world-australia-57925798
[9] Swati Pandey, “Australia could be the Saudi Arabia of clean energy, powering the world,” The Sydney Morning Herald, August 30, 2022, https://www.smh.com.au/business/the-economy/australia-could-be-the-saudi-arabia-of-clean-energy-powering-the-world-20220825-p5bcnk.html
[10] Australian Government, Critical Minerals Strategy
[11] Clare Church, and Alec Crawford, “Green Conflict Minerals: The fuels of conflict in the transition to a low-carbon economy,” International Institute for Sustainable Development (August 2018), https://www.iisd.org/story/green-conflict-minerals/
[12] Australian Trade and Investment Commission, Critical Minerals Prospectus
[13] Yellishetty, “Rich deposits”
[14] Australian Government, Critical Minerals Strategy
[15] Sophia Kalantzakos, “The Race for Critical Minerals in an Era of Geopolitical Realignments,” The International Spectator 55, no. 3 (July 2020): 1-16, DOI: 10.1080/03932729.2020.1786926
[16] Australian Government, Critical Minerals Strategy
[17] Rodrigo Castillo, and Caitlin Purdy, “China’s Role in Supplying Critical Minerals for the Global Energy Transition. What Could the Future Hold?,” The Brookings Institution (July 2022), https://www.brookings.edu/wp-content/uploads/2022/08/LTRC_ChinaSupplyChain.pdf
[18] Kalantzakos, “Geopolitical Realignments”
[19] Kalantzakos, “Geopolitical Realignments”
[20] Yellishetty, “Rich deposits”
[21] Australian Government, Critical Minerals Strategy, 15, 20
[22] IEA, The Role of Critical Minerals, 129
[23] Church, and Crawford, “Green Conflict Minerals”
[24] Australian Trade and Investment Commission, Critical Minerals Prospectus
[25] Pandey, “Powering the world
