CRITICAL MINERALSCountering Coercion: Australia Must Engage with Allies on Critical Minerals Supply
China’s use of coercion to control critical mineral mining and processing projects, their output and even whole supply chains has motivated several countries to take increasingly strong measures to secure alternative supply chains. Meanwhile, China’s state-linked companies continue to use multiple channels to manipulate markets at scale.
China’s use of coercion to control critical mineral mining and processing projects, their output and even whole supply chains has motivated Australia and its strategic partners to take increasingly strong measures to secure alternative supply chains. Meanwhile, China’s state-linked companies continue to use multiple channels to manipulate markets at scale.
Australia and its partners need to apply more concerted action.
These actions must focus on ways to mine, process and transport mineral resources from developed and developing nations in a manner consistent with national values and sustainability standards. New supply chains are needed to meet demand for manufacture of energy and high technology products and reduce reliance on China-controlled supply. These measures are not aimed at trade bifurcation, but about setting up alternatives that promote resilient, competitive markets for investment and production.
Australia has begun to take action. In May, Canberra announced stricter criteria on foreign investment, signalling strengthened intent to counter coercive influences on Australia’s minerals projects and supply chains. Similarly, the divestment order issued in June to China-linked entities with shareholdings in rare earths company Northern Minerals demonstrated the government’s commitment to applying rules strictly and fairly.
While Australia recognises that investment by China-linked companies is essential to its mining industry, it now has the opportunity to entice other partners to invest capital and diversify the market.
This is because industrialised nations that have traditionally confined themselves to domestic mineral projects have moved to friendshoring—facilitating supply from allies as a way to reduce reliance on China and some other dominant suppliers. Both the United States Inflation Reduction Act of 2023 and the European Union’s Critical Materials Act, which came into effect this May, provide the same level of support to critical minerals projects in Australia and other allied nations as domestic projects.
Investment from allies is already starting to flow. In May, the Canadian government conditionally approved US$300 million loan funding for the Nolan’s rare earths project in the Northern Territory, adding to the Australian government’s US$553 million debt finance. The project will supply mineral resources to Canadian renewable generation manufacturing. Japanese-supported, ASX-listed Lynas Rare Earths is developing a processing facility in Western Australia and another in Texas, United States, which is part funded by the US government.