Squiz Shortcuts - Critical minerals

Your Shortcut to… Critical minerals

Critical minerals have been in the news a lot lately, particularly in relation to world conflicts and trade deals, so in this Squiz Shortcut we’ll take a look at:

• what they are

• what they’re used for

• and why they’re considered to be critical…

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Why have critical minerals been in the news so much?
One reason is that there’s a big deal going down in Ukraine this week - its parliament will vote to ratify an agreement that US President Donald Trump has been trying to make happen for months…

Remind me what that deal is about
It involves the US sharing in Ukraine’s wealth of critical minerals (which accounts for around 5% of the world’s supply) in return for financial support and setting up a joint reconstruction investment fund with a view to rebuilding cities damaged by the war with Russia… And this is not the only big story about these minerals around at the moment. They’re in hot demand all over the world…

Where else have they come up?
They’re partly why the US is keen to annex Greenland, which is believed to have a rich supply of them under the ice, and they’ve been mentioned in conflict zones like the Democratic Republic of the Congo, where mining sites (and their income) are tightly controlled by rebel militia - we’ve done Shortcuts on both Greenland and the DRC if you’d like to explore those issues further. It’s economic superpowers like the US, China and Russia who are after them… 

Why do they want them so much?
They’re called critical minerals for a couple of reasons - but the first clue is in the name. They’re a ‘critical’ component in making a lot of the modern devices we depend on everyday… 

Oh yeah, like what?
Some quick examples that come to mind are mobile phones, fibre-optic cables, and semi-conductors for computer chips… And they’re also vital for making “green” technologies like solar panels, EV batteries, and the wind turbines used in wind farms. 

So they’re pretty important at the moment
They sure are… and, as the world changes over to renewable sources of energy in accordance with the Paris Agreement and the race to net zero, demand for them is going through the roof… And this carries potential knock-on effects for economies and national security. 

Why is that?
It brings us to the other reason why they’re considered ‘critical’. There’s a risk that their supply chain could be disrupted due to the dominance of one country, global unrest, or, let’s say, a pandemic... This is what we saw happen a few years ago when China’s manufacturing plants were brought to a standstill in the midst of the Covid-19 outbreak. 

Is that because China is a major manufacturing hub?
Exactly… China’s considered the ‘factory of the world’, and supply chains are only just beginning to recover from the ripple effect of the pandemic, and we’re 4 years down the track. So, long story short, governments like ours are keen to lessen our reliance on foreign supplies of critical minerals, lest another disruption like that happen. And there’s a very good reason for us here in Australia to do that…

What’s that?
We’re rich in critical minerals ourselves… 

So, when you say critical minerals, which ones are you talking about?
There’s about 50 minerals globally categorised as critical so we won’t list all of them, but the main ones to note that are vital for the energy transition are lithium and cobalt (they’re both needed to produce EV batteries and battery energy storage systems), copper (that’s used in cables for transporting electricity), and nickel (which is another key mineral used in EV production). 

Got it, and which ones do we have?
Australia lists 31 of them, but we’re very rich in a few that we just mentioned… We’re the world's second-largest producer of lithium and we’ve got some of the biggest natural deposits of copper, nickel and rare earth minerals on the planet.

Rare earths is another term we hear a lot in the news…
We do, but it’s not necessarily an interchangeable term with critical minerals. Rare earth minerals are a group of 15 minerals that are considered critical - they’re a subset of critical minerals if you like - and they’re known as “chemical wunderkinds”... They’re used in everything from coloured LED lights and magnets, to glass manufacturing, nuclear technologies, and defence tech, like radar systems. 

So it’s good that we’ve got a lot of them
Well, yes, but they’re also notoriously hard to extract because they’re generally found in ore which doesn’t tend to occur in concentrated amounts, so a) it’s expensive to mine and b) separating the minerals from the ore is a difficult process - one that China is very good at. In fact, they’re so good at it that around 95% of the world’s rare earth minerals are sent there for processing. 

Do we send ours there?
Yep - we send most of our critical minerals to China for processing. As well as being able to efficiently extract the rare earths we mentioned, China processes over 70% of the world’s critical minerals for the renewables market. 

If we’re so rich in them, why don’t we process our own?
Excellent point. We plan to, along with our other critical minerals. And if we manage to do that, we stand to be at the forefront of the global green energy transition and get a leg up on the other places they’re found, like Chile, Indonesia, parts of Africa, and Eastern Europe… 

And we’ll be less reliant on China
Exactly… And we’d also be in a position to sell our refined product to overseas buyers like the US, the European Union, India, Japan, South Korea and the UK.

What is our mining sector worth?
Big bickies… It generates more than $450 billion in export revenue, with most of it coming from iron ore and coal, according to the Minerals Council of Australia. And of that, just $7.6 billion is from critical minerals, even though we’ve got a lot of them. 

But that could increase?
That’s the plan… Stepping up our production of critical minerals and attracting investment in our mining and green energy sectors is a big part of the Albanese Government’s Future Made in Australia bill that was passed late last year. 

How will they do it?
The plan is to attract investment from local and overseas entities through tax incentives and grants, with the additional aim of building up a reserve of critical minerals to sell to our friends. And there’s another reason the government is keen to get this all moving…

What’s that?
It’s committed to reducing Australia’s carbon emissions to net zero by 2050, and building up our own industry and supply chain of critical minerals here is, well, critical because our renewable energy supply is going to depend on it pretty soon…

Any other reasons?
Yep, it’ll shore up our national and economic security against the increasingly unstable situation in the world - and analysts say it’ll ensure we still have a market for our resources if, for instance, tensions between China and the US boil over…

The heat’s turning up… 
Is it ever… Not least because the 2 countries are in a trade war. So, we’re in a bit of a tricky position when it comes to China, because Chinese investors have made no secret of the fact they want to take a bigger stake in our mining sector, particularly in WA, where a lot of our critical minerals come from. 

Why is that tricky?
It’s delicate because we need to keep China as a trade partner without increasing its market dominance… We’re also traditionally closely aligned with the US, which is in competition with China. And under the Biden administration, the US was a big supporter of Australia building an alternative supply chain in order to dilute China’s stronghold on renewables. 

Has that changed, now that Trump’s in charge?
Not yet, but as we’ve witnessed, nothing is set in stone with the Trump administration when it comes to trade. But our minerals and our potential as an alternate supply chain have been floated as possible levers that could be pulled to help us in future trade negotiations with the US, particularly lately.

What’s happened lately?
As a result of the escalating trade war, China has banned some exports of critical minerals to the US… And now Trump is scouring the globe for them, and, as we covered at the start of this Shortcut, he’s ready to make deals to get them… 

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Onto our Recommendations

Reading: This article in The Conversation explains the US-Ukraine minerals deal if you’d like to know what’s been agreed between them.

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