Digging into the Oz-US minerals deal

Digging into our minerals deal with the US

The first face-to-face meeting between PM Anthony Albanese and US President Donald Trump took a while to happen, but the timing of a trade war between America and China over rare earth minerals has been fortuitous for Australia. With uncertainty around the supply of minerals from China, we’ve stepped in and signed a deal with the US worth billions to harness our own mineral deposits. So in this Squiz Shortcut, we’ll look at:

• what’s in the deal

• how it’ll work

• and what it means for our relationship with the US…

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Squiz the Shortcut

Why was the PM’s first sit-down meeting with Trump such a big deal?
It’s taken 9 months to happen - that’s an unusually long time for a President not to have sat down with an Oz PM - and there was a lot riding on it. In the past, we’ve been assured of friendship and a mutually beneficial trade relationship with the US, but since Trump’s second term has begun, things have been a bit rocky. 

Define rocky?
Well, the Trump administration has imposed tariffs on our imports, placed the AUKUS security pact under review, and suggested we spend a lot more money on defence. There’s also been some tension around the Albanese Government’s recognition of Palestinian statehood… And the fact it’s taken so long for the PM’s office to lock in a formal meeting with the President has led to speculation that something in the relationship was amiss. 

So he was copping some heat in the lead up?
Yep… Add to that Trump’s history of being unpredictable, and it added up to a fair bit of pressure on Albanese going in. But he came away from it mostly drama-free, having secured a couple of deals he really wanted.

What are they?
A clear signal that the AUKUS security agreement between the US, Australia and the UK is going ahead, and a hefty investment in our minerals industry… 

Tell me about the minerals deal…
You might have read in the Squiz Today newsletter about trade tensions that have been brewing in the past couple of weeks between China and the US over rare earth minerals. 

Remind me what they are…
They’re a subset of critical minerals that are used in the production of a lot of our everyday items (think smartphone and computer parts, and the motors of EVs). They’re also hugely important in green tech for things like wind turbines, as well as being useful in some weapons and medical technologies like MRIs and lab diagnostics.

How many are there?
There are only 17 of them, but they’re viewed by experts as chemical wunderkinds - and with all of their uses, they’re in high demand all over the world. And it just so happens that we have a lot of them naturally occurring, along with other critical minerals, here in Australia. 

Haven’t I already read a Shortcut about this?
We’ve covered critical minerals before, so you may well have. But as a quick reminder, they’re very tricky to mine and process because they’re found in low concentrations, often mixed together - and they’re chemically similar, making them difficult to isolate… And one country that’s been investing in huge plants to process these minerals is China. 

So, they’re further down the track with it?
Yep… They’ve been throwing a lot of money and research into building the infrastructure over the past 30 years - and now they’re the dominant player in that space. They process around 90% of the world’s rare earth minerals. 

What do we do with ours?
Currently, we send them to China. So does the US, and most other countries that mine them, because they have the know-how, and it works out a lot cheaper than trying to do it at home. But the Chinese Government has recently tightened export rules around these minerals to “safeguard national security”…

What are the new rules?
China now requires any foreign company shipping out products containing rare earth minerals processed there to get a permit - and it says products headed for use in weapons technology or the computer/AI industry aren’t likely to get one… That’s made Donald Trump quite upset.

Why is that?
The President has accused China of exploiting its hold over the world’s supply of refined rare earths, and threatened to whack an additional 100% tariff on Chinese imports from next month… But while that was all playing out, our PM showed up at just the right time, offering the kind of deal that ticks all of Trump’s boxes.

It’s a win/win?
Exactly… There’s big money involved, America gets a steady supply of rare earth and critical minerals, and the deal stands to reduce our reliance on China. As a side benefit for us, we’d be an alternative processing option for other countries - although we’d be competing with China’s low labour costs, so that could be a way off. 

What is the Oz-US minerals deal worth?
It’s worth $8.5 billion… And it’s kicking off straight away, with both countries stumping up around $1 billion each over the next 6 months to get things started.

How will it work?
The idea is that companies can apply for funding to help them set up new mines, as well as refineries and processing plants. The first project is already locked in, and there are projects slated for nearly every state and territory. 

What are the challenges?
There are some concerns, of course - China has run into environmental issues around processing rare earths, which uses a lot of energy and can generate heaps of waste. And there are questions over whether the timeline is feasible… But Trump isn’t underselling the deal. He says it stands to make both countries “militarily secure and economically unstoppable”. And Albanese agrees, saying it takes our relationship with the US “to the next level”. And, with it comes a political reset…

How so?
Well, the Oz-US relationship looks a lot different on the other side of Monday’s meeting between our 2 leaders… Trump was full of praise for Albanese, saying he’d “done a fantastic job as Prime Minister”. There were a few elephants in the room - one report called them ‘submarine-shaped elephants’ - those being some questions around AUKUS. But the President said they were going “full steam ahead” in production. 

Is it still under review?
Yes… But Trump endorsed it, so the $368 billion deal is looking much more secure. That said, US officials want some aspects of the agreement clarified, and things can change quickly with the Trump administration - just ask our Ambassador to the US, Kevin Rudd…

What happened with KRudd?
A journalist brought up his now-deleted tweets describing Trump as a “traitor” and “the most destructive President in history”. Rudd started explaining, but he was interrupted by Trump, who said, “I don’t like you either, and I probably never will”. The PM, who handpicked Rudd for the post, later downplayed the exchange, saying Trump’s response was light in tone, and that Rudd apologised to the President afterwards and was told “all is forgiven”... But the Coalition was quick to jump on it.

What did they say?
Coalition leader Sussan Ley called for Rudd to be removed from the role - but then walked it back after some colleagues said her comments were “churlish”. She also criticised how long the meeting took to get organised, and the fact that Trump wouldn’t budge on tariffs… But back to Rudd, the PM’s office says he “works his guts out”, that his groundwork paved the way for the “hugely successful” meeting, and he’s not going anywhere. 

So we’re back on solid ground with the US?
Yep… Overwhelmingly, analysis of the meeting - including from former Coalition PMs Malcolm Turnbull and Tony Abbott - has taken the view that it was a win for Albanese…

One more thing - did the PM take a gift?
He sure did… A model submarine for Trump and jewellery for the First Lady. Talk about subliminal messaging…

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Onto our Recommendations

Reading: This ABC explainer which is specifically about rare earth minerals and their uses. 

Reading: Annabel Crabb’s piece about that awkward exchange between Trump and Rudd. She’s captured it as only she can…

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