BRISBANE TIMES
An Australia-Japan partnership could be crucial for minerals security
By Jeffery Wilson
February 7, 2020 — 4.13pm
The US-China trade war has thrown up many unexpected surprises for the global economy. One of the more concerning is that critical minerals might become a new front in the contest between the economic superpowers.
Lynas' Mt Weld mine will feed the new cracking and leaching plant.
Photo: Bloomberg
Critical minerals – such as lithium, cobalt and rare earths – are the lifeblood of modern, technological societies. Sometimes called the “vitamins of industry”, they are used in electronics,
telecommunications medical, renewable energy and military applications.
But current supply chains are not fit-for-purpose. Critical minerals are often monopolised and insecure, such as China’s control of around 85 per cent of rare earth supplies.
In other countries, like the Democratic Republic of Congo child labour in cobalt mining is unfortunately common.
As digital technologies and renewable energy systems expand, demand for critical minerals will steadily rise. It is imperative to develop secure and sustainable supply chains to provide the
foundations for 21st century technologies.
This imperative has become more pressing as rare earths are dragged into the US-China trade war.
This year, the Chinese government has sent clear signals that it may restrict rare earths to the US as part of the ongoing trade dispute. This would replay a similar episode in 2010, when Chinese rare earth sales to Japan were suspended during a dispute over the Senkaku islands.
If China’s rare earths threat was executed, it would deprive the global economy access to an essential industrial input. And if the trade war escalates further, it is not inconceivable that supplies
of other China-supplied critical minerals – such as gallium, indium, molybdenum and tungsten – could follow suit.
Whether the trade war escalates after the recent US-China trade agreement, it clearly demonstrates that we need much greater diversity in the supply of these important products. Here, Australia has an essential global role to play.
Australia is richly-endowed with critical minerals, with world-class reserves of lithium, rare earths, and cobalt among others.
A Critical Minerals Strategy, released by the federal government in March this year, promises a suite of policies to help develop these emerging industries.
Australia is also home to many of the new firms entering the global industry. Lynas Corporation is the largest rare earths producer outside China. Pilbara Minerals is establishing a new ‘hard rock’
source of lithium based on spodumene ore.
These pioneering companies demonstrate Australia’s potential as an emerging critical minerals supplier.
However, more like these are needed. And to do so, Australia must to work with international
partners. In technology-intensive sectors, close collaboration between producers and consumers is
essential to develop globally-integrated supply chains.
Australia has recently begun international collaboration with the United States. Last month, Resources Minister Matt Canavan and Commerce Secretary Wilbur Ross signed a memorandum of
understanding on critical minerals co-operation.
But as Japan has been one of Australia’s most important resource partners, it is surprising that these
co-operation efforts have not been extended to Japan as well.
Indeed, Japan is an ideal critical minerals partner. There is a long history of Australia-Japan co-operation in the resource industry, dating back to the creation of the iron ore industry in the 1960s. Japanese companies such as INPEX were also key backers behind the recent establishment of LNG projects on the North West Shelf.
There is now a mutually-beneficial opportunity to reproduce this model for critical minerals. Japan can ensure secure and reliable supplies for its technology industries, while Australia will benefit from an important trade and investment opportunity.
Strong inter-governmental links also undergird these partnerships. The long history of co-operation and trust between Australia and Japan saw the governments elevate their relationship to ‘special strategic partnership’ status in 2014. A shared commitment to an open, transparent and rules-based
global order complements bilateral collaboration.
Indeed, Japanese investors are already active in the Australian market. Sojitz Corporation, a Japanese trading house, was the foundational partner of Lynas Corporation offering loan and equity finance in 2010. Lynas has since become a globally-significant rare earth supplier, allowing Japan to reduce its dependence on Chinese supplies from 82 to 58 percent by 2018.
But more needs to be done. The strong Australia-Japan relationship, and our longstanding success in resource co-operation, has for several decades underpinned the security of the global economy. It is time we extend this partnership to critical minerals to secure our technological and clean energy
futures.
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