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Australia needs to catch up with China’s 30-year head start in the booming critical minerals supply chain, the Albanese government says, as local industry warns this would create threats to the budget bottom line and risk environmental controversies.
The federal government is stuck in the middle of the United States’ push to break China’s stranglehold on the global critical minerals supply chain.
Pilbara Minerals, a major lithium producer, says the government must deliver more than just loans to grow local critical minerals.Credit: Matthew Abbott/The New York Times
These are minerals such as lithium, nickel, cobalt and rare earth elements that are crucial for wind turbines, solar panels and batteries the world needs to replace polluting fossil fuels – and Australia has them in abundance.
Resources Minister Madeleine King said that China’s industry is two or three decades ahead of the rest of the world. “They invested and, to be frank, most of the western world thought we could or would outsource an offshore minerals processing,” she said.
“We should have been doing it [processing minerals locally] before to be quite frank.”
The federal government says the forecast boom in critical minerals could replace the tens of billions of dollars in revenue from coal by as soon as 2028, as fossil fuel exports dwindle and renewable energy ramps up.
But to realise this green dream, Australia needs to rapidly open a raft of new mines and launch a new processing industry. This is a feat that has proved challenging for the local steel industry despite the country’s abundance of coal and iron ore, due to high labour, energy and transport costs.
The government last month announced a $4 billion fund for loans to the critical minerals industry. However, Western Australia Hastings Technology, which is developing a rare earths mining project, said local processing would not be possible without public funding in the form of grants and tax breaks.
The government last week ditched $33 billion in infrastructure spending to ease pressure on the budget amid inflation and a cost of living crisis.
Hastings Technology chief executive Paul Brown said that applying traditional commercial debt financing principles would “not help more rare earth projects in Australia transition from exploration to development and production”.
“The diversification of concentrated markets like rare earths will be critical to ensuring we can address the forecast supply gap for minerals to support global decarbonisation,” Brown said.
The US is taking on China through the Biden administration’s Inflation Reduction Act, which some analysts believe could deliver up to $US1 trillion ($1.56 trillion) in industry subsidies for companies that develop new mines, minerals processing facilities and other elements of the green materials supply chain.
As Prime Minister Anthony Albanese visited Washington last month, the US Commerce Secretary Gina Raimondo said China’s market dominance was a material risk and that Australia and the US must work to break its global stranglehold because “it can cause a great deal of pain, very quickly”.
King said the federal government could not match the scale of the US fund, but that it was considering further measures to spur industry growth.
US President Joe Biden spruiks his multibillion-dollar Inflation Reduction Act.Credit: AP
“Production credits or some other kind of tax treatment remains on the table as we seek to further develop this industry,” she said.
Critical minerals companies also said Australia’s lengthy environmental assessment process must be sped up to compete with other countries with less onerous regulations – a move that would anger Labor’s left-wing members who want the government deliver on its overdue pledge to beef up environmental regulations.
The Kalgoorlie Nickel Project’s chief executive, Andrew Penkethman, said faster environmental assessments at the state and federal level were a top priority to achieve mineral production.
“If we’re going to ensure supply chain security and diversity we have to be able to compete with jurisdictions such as Africa, South America and right around the world,” Penkethman said.
Barrenjoey Capital Partners mining analyst Glyn Lawcock said it could take seven years to establish a producing mine in Australia. “You’ll see that happen in less than two years in Africa,” he said.
Australia’s largest lithium producer, Pilbara Minerals, said that Australia’s high labour, construction and energy costs will cripple the government’s value-added ambitions.
According to Pilbara Minerals managing director Dale Henderson: “Production tax credits incentivise both private sector investment and rapid project delivery. This government support will assist Australia in the global race for industry share that is underway.
“Without this, investment will be lost to those countries who have bolder ambitions and more progressive support regimes.”
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