Australia is at a critical juncture with the rising demand for rare earths and the potential market manipulation by China. As political risk becomes synonymous with price risk in the rare earths industry, the Australian government is urged to take immediate action.
At the recent Darwin Dialogue on Critical Minerals, industry stakeholders and government representatives from key allies discussed the challenges posed by China’s monopolistic control over rare earths production. The need for sustainable supply chains with reliable allies is paramount to counter China’s dominance.
To address this challenge, Australia is ramping up its efforts with soft loans and investment in common user infrastructure like the Illuka rare-earths refinery. However, more needs to be done to ensure long-term success.
Drawing lessons from US history during the Cold War, Australia should consider setting price floors on rare earths and secure commitments from allies like the United States, Japan, South Korea, and the European Union to underwrite a floor-price scheme for Australian rare earths.
By taking a proactive approach to secure long-term offtake agreements at workable prices and establishing mechanisms like contracts for differences, Australia can mitigate the risk posed by China’s market manipulation and ensure a reliable supply of critical minerals for the future.
In a world where political risks can have a direct impact on market prices, interventionist policy responses are necessary to protect national interests and secure a sustainable future for the critical minerals industry. Australia must act swiftly and decisively to navigate the complex geopolitical landscape and emerge as a key player in the global rare earths market.
