If ever there was a catalyst for decisive action, that was it. For despite all the swagger and bluff about “a deal” with Ukraine over critical minerals or taking control of Greenland, the far more obvious destination to break China’s grip on critical minerals was always in full view.<\/p>\n
Right here, in Australia.<\/p>\n
How we use critical minerals<\/a><\/p>\n Rare earths are found all over the globe, but as technology advances they’re becoming part of our everyday lives.<\/p>\n This week’s historic partnership, involving joint investments in mining and processing critical minerals, including rare earths, builds on earlier investments under Joe Biden’s Inflation Reduction Act.<\/p>\n Beijing’s recent actions may have been the last straw. But it isn’t the first time it has wielded its muscle with minerals.<\/p>\n It restricted exports of gallium and germanium \u2014 key materials in the creation of microchips \u2014 in December last year after the Biden administration refused China access to the high-grade chips required for Artificial Intelligence.<\/p>\n But the power plays go back years. The Middle Kingdom has engaged in not-so-subtle and, occasionally, nefarious tactics to entrench its near-monopoly position on much of the global metal trade.<\/p>\n And it has never been afraid to use the power that a monopoly delivers to impose its will and punish nations it considers hostile.<\/p>\n Heavy metal but no music<\/p>\n America dominates the global financial system. The Middle East controls energy.<\/p>\n What isn’t generally known is that China, during the past 40 years, has created a vice-like grip on the mining, refining and production of global metals.<\/p>\n Critical minerals industry cheers US investment deal<\/a><\/p>\n Australian critical minerals companies could expect more international and domestic investment in producing and processing following the deal, experts say.\u00a0<\/p>\n It’s not just nickel, lithium, graphite and cobalt \u2014 the materials essential for battery production and the renewable energy age \u2014 where it holds the rest of the world in its palm.<\/p>\n It is also the world’s biggest producer of steel, dominates aluminium smelting and production and has an outsized influence on copper.<\/p>\n The Australian Strategic Policy Institute’s John Coyne points out that China currently controls production of 29 commodities, including 22 metals and seven industrial minerals.<\/p>\n That delivers it power on both sides of the demand and supply equation.<\/p>\n Commercial miners of many of these minerals have almost no option but to send their raw material to China for processing. With such a stranglehold over the supply of refined material comes pricing power.<\/p>\n Australia and the US have formed a partnership to combat China on critical minerals.\u00a0 (AAP: Lukas Coch)<\/p>\n “Where China does not possess a near monopoly, it can control the market through ‘monopsony’, a market condition featuring one overbearingly and singularly important customer,” Coyne says.<\/p>\n “While it does not produce the most essential battery materials \u2014 lithium, cobalt and graphite \u2014 it buys, refines and exports them to incomparable degrees.”<\/p>\n But when it comes to rare earths, China has no rival. Blessed with ample deposits, it deliberately embarked upon a plan for global domination as early as 1992 when Deng Zhioaping expressed a desire to mimic the Middle East’s stranglehold on energy.<\/p>\n Huge government investment and lax environmental concerns helped. But Beijing also nurtured expertise in refining with massive investments in research.<\/p>\n It then ventured into manufacturing, creating a near monopoly around the production of “permanent magnets”, which are now essential components in everything from smartphones to robotics and missiles.<\/p>\n Rare earths refining is a difficult and dirty business. And it takes years to build into a profitable enterprise. But it has now become hugely strategic from a national security perspective, which has shifted priorities within the West in an ever more hostile world.<\/p>\n Essentially, China has cornered the entire rare earths ecosystem from mining to manufacturing. And it has been utterly determined to maintain that.<\/p>\n Price manipulation and Astroturfing<\/p>\n A little over 15 years ago, a Chinese fishing trawler collided with two Japanese coastguard vessels near the Senkaku Islands, a disputed territory in the South China Sea.<\/p>\n The trawler captain was arrested and the dispute quickly escalated into a major stand-off between Tokyo and Beijing.<\/p>\n Within little time, China dramatically raised the stakes by imposing an unofficial embargo on the supply of refined rare earths to Japan, much like the unofficial three-year trade ban on Australian imports during the pandemic.<\/p>\n Albanese and Trump ink deal for ‘dominance’ of critical minerals<\/a><\/p>\n Donald Trump and Anthony Albanese have inked a deal for “critical mineral and energy dominance” in a new partnership that will tip billions into mining projects in the US and Australia.<\/p>\n Startled, Japanese officials began looking elsewhere for a more secure line of supply.<\/p>\n They opted for an Australian company, Lynas Rare Earths, which was extracting a range of high-end rare earths from its West Australian mine at Mount Weld, which sits in the plug of an ancient volcano.<\/p>\n But Japan needed fully processed and refined material. To achieve that, it backed Lynas with cheap loans to build a new facility in Malaysia.<\/p>\n And that’s when things got ugly.<\/p>\n Chinese supplies suddenly flooded the market, sending prices crashing.<\/p>\n In Malaysia, meanwhile, a community backlash over the safety of the new plant gathered momentum. That fuelled political opposition to the project despite a clean bill of health from the International Energy Agency.<\/p>\n The combination of the two sent the Lynas share price crashing as the company flirted with collapse.<\/p>\n Loading…The game continues<\/p>\n Throw forward 12 years, to June 2022.<\/p>\n Lynas Rare Earths, funded by the US government under the Biden administration’s Inflation Reduction Act, had just won a $US120 million ($185 million) contract with the US Department of Defence to build a heavy rare earths separation facility in Texas.<\/p>\n<\/p>\n