Australia's A$1.2B Plan to Counter China's Mineral Grip

Australia is launching a A$1.2 billion strategic reserve for critical minerals, a direct move to secure supply chains for itself and its key international partners. The government's plan will initially focus on three essential resources: antimony, gallium, and rare earths.

The details were unveiled as Treasurer Jim Chalmers promoted the initiative in Washington. At a meeting with finance ministers from the "G-7 plus" group, hosted by U.S. Treasury Secretary Scott Bessent, Chalmers framed the reserve as a way to "shore up access to critical minerals during periods of market disruption."

This move fleshes out a policy first proposed by the Labor party before the last federal election. The core challenge is clear: while Australia has untapped reserves of these minerals, China dominates their global processing, accounting for 48% of antimony, 98% of gallium, and 69% of rare earths.

The plan raises two key questions: Why have these specific minerals become so vital, and can Australia truly establish itself as the "most reliable" mineral partner for its allies?

What Makes These Minerals "Critical"?

Critical minerals are elements essential for modern technology that have no viable substitutes. Their applications are wide-ranging and fundamental to several high-tech industries, including:

• Green Energy: Solar panels and wind turbines.

• Electronics: Lithium-ion batteries, semiconductors, and computing.

• Defense: Advanced systems like radar, fighter jets, submarines, and drones.

• Medicine: High-tech equipment and medical imaging.

Australia faces a significant supply risk despite its abundant reserves. The country exports most of its raw critical minerals to China for processing before they are sold back as finished components in products like solar panels. This dependency makes the market vulnerable to disruptions from global events or trade disputes.

All three minerals targeted by the new reserve are considered "dual-use," meaning they have both civilian and military applications. Antimony is used in flame retardants and night vision goggles; gallium is vital for semiconductors and radar; and rare earths are necessary for the powerful permanent magnets used in fighter jets and lasers.

How the Strategic Reserve Will Work

To build this reserve, Australia will leverage its export finance credit agency to facilitate "offtake agreements." This model allows buyers, including the Australian government itself, to agree to purchase minerals as security, sometimes even before a mine has started production. These secured minerals can then be sold to Australia's international partners.

This strategy is designed to make Western investment more competitive. Currently, Chinese investors are often more willing to provide the equity and long-term offtake agreements needed to get mining projects off the ground. China also holds significant cost and technical advantages over Western firms in the processing stage.

A Geopolitical Play for Western Allies

The timing of the announcement, just before the G-7 plus meeting, was a deliberate strategic move. The G-7—comprising the United States, Britain, Canada, France, Germany, Italy, and Japan—has already agreed to a five-point plan for critical minerals security. While not a member, Australia often aligns with the group's positions.

Many G-7 nations are also part of the Minerals Security Partnership, an initiative aimed at building sustainable and diverse critical mineral supply chains. By establishing the reserve, Australia is signaling its willingness to intervene in the market to support the strategic needs of its allies.

Above all, this is an effort to reassure the United States that Australia is a dependable partner. The U.S. is urgently seeking to secure its own mineral supplies, making Australia's "geoeconomic" decision—using economic tools to achieve geopolitical goals—a timely one. The aim is to diversify supply chains and reduce collective dependence on China.

The Challenge of Market Volatility

Entering the critical minerals market is inherently risky. The sector requires massive public and private investment, often supported by financial tools like export credits.

The recent boom-and-bust cycle in the lithium market serves as a cautionary tale. High demand for electric vehicles (EVs) drove a surge in lithium mining, but when EV sales slowed, the market collapsed, forcing some Australian mines to scale back or halt production.

While Australia's new reserve may improve Western access to raw materials, a major hurdle remains: China's entrenched dominance in processing is built on years of accumulated knowledge, advanced skills, and superior technology.