Madeleine King says she is determined to push Europeans to value “green premium” Australian critical minerals above cheaper rivals.
Feb 7, 2024
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Resources Minister Madeleine King will increasingly challenge her European counterparts to press the continent’s behemoth carmakers into favouring Australian critical minerals over cheaper but ethically dubious sources of raw materials for EVs and green energy technology.
In an interview to outline her agenda for the year ahead, King describes a worsening disconnect between Europe’s “really keen” environmental, social and governance ambitions versus what they are prepared to pay for sustainable and ethical supply.
“Much as we want a green premium on some of these low-volume commodities, it’s just not appearing,” King says.
Speaking as Australia’s nickel and lithium industries tank under the weight of offshore competition, King says there is an urgent need to educate the “wider community about the production of critical minerals and rare earths”.
Australia holds a unique position in the global supply chain for the critical minerals market at a time of growing geopolitical tension and rising focus on net-zero technologies.
But collapsing prices have slammed the nickel and lithium industries, leading to mine closures and prompting crisis talks last month between miners and King that raised the prospect of a tax break for downstream processing of some minerals.
BHP nickel boss Jessica Farrell has said Australia needs the right policy settings to remain globally competitive in strategic and critical minerals.
King last year unveiled the Australian government’s critical minerals strategy, which aims to accelerate the development of extraction and value-adding of materials needed for EVs, batteries, magnets, wind turbines and military equipment.
By 2040, according to the International Energy Agency, demand for battery minerals such as lithium will jump to 40 times on 2020 levels, while rare earth elements supply may need to increase seven times.
But slow development timeframes for critical minerals projects and low-volume markets, which are often dominated by China or producers from economies with weak environmental or labour standards, means Australia needs to do more to emphasise its natural advantages, she says.
“We’re a reliable supplier of commodities that are not subject to undue interference or restraint from anyone, but particularly the government,” says King.
But the higher cost of production in Australia for many critical minerals means buyers should “have a good honest” look at the consequences of sourcing cheap alternatives.
“If the energy transformation is about saving the planet, of being cleaner and greener and sustainable and having high standards, there has to be recognition of those [higher] standards in Australia. Otherwise, what’s the point?”
Will they pay?
King tells The Australian Financial Review she is constantly reminded of the “conflict” between the need to encourage more consumers to switch to technologies such as battery electric vehicles at a price point they can afford.
“We want to run more things like battery storage and less fossil fuels in the transport system, but equally there’s not a clear standard internationally or anywhere for provenance of materials that … can damage the environment”.
“These things will be expensive because mining, production and refining ethically, responsibly and sustainably will cost more than if you do it in a way that damages the environment and doesn’t really care about carbon emissions associated with mining or refining.
“Is anyone going to pay for it? Well, that remains to be seen.”
King is equally sceptical that European carmakers – already under pressure from a flood of lower-cost Chinese EV imports – will voluntarily opt for higher-priced critical minerals inputs.
“You have politicians in Europe and the European Union who talk it up, but they need to push their manufacturers a bit more to make sure they’re walking the walk,” she says.
“When it comes to EVs, what’s inside them can be deeply problematic.
“Jurisdictions like Australia and Canada, which have high environmental, workplace safety standards – which we want to keep because we want to maintain the standard of living of Australians – find it very difficult to compete where countries have seemingly hardly any of those standards at all.
“That’s something that needs to be faced and talked about”.
King adds that on the other “end of the spectrum”, she hears from many Europeans that they are eager for even bolder ESG standards, with little understanding of how they work in practice.
“Because they have outsourced most of their mining, production and refining in the last few decades they don’t have a really practical idea of what the standards should be,” she says.
“So there’s a risk they pitch [standards] at an unachievable level.”
Shared investment
The resources minister says her priority for critical minerals development this year will be to boost international investment in Australia, help support miners facing challenging market conditions – such as lithium producers – and bed down Labor’s growing desire to develop “common-user infrastructure” for critical minerals proponents.
Rather than pursuing US-style production credits, Labour aims to unlock new critical minerals supplies by expanding “co-investment” with willing states.
The government late last year updated the critical minerals list, which contains 26 minerals including lithium, manganese, cobalt and rare earth metals, and began a new list of “strategically” critical minerals that King in December described as “essential for the energy transition”.
King is now considering two potential models of support. One is to build new greenfield infrastructure hubs, and the second would repurpose and reinvest in existing industrial parks to suit critical minerals
Asked where such hubs would most likely be placed, King says they will inevitably be near deposits.
“I don’t want to pre-empt [decisions about hub locations], but there’s going to be a sort of natural selection, for want of a better term.
“You don’t necessarily need to throw a whole bunch of government funding at a shiny new industrial park or something like that. But there are constraints within existing infrastructure that can be addressed”.
Low-hanging fruit, as she describes them, may be available in the form of expanding existing roads and other common-use infrastructure such as railways or ensuring supply of energy and gas that will be critical to critical minerals processing.
Expanding common-use infrastructure is what “government does best”.
“It shouldn’t be left to private interests to build what become shared roads, water resources, and energy access,” she says.
“And there’s no way I’m getting this through a budgetary process without co-investment from states.
“When I meet with resources ministers they’re always up for this because they know the more of the resources they get out of the ground, the greater the benefit from state-based royalties … and more jobs.”
“We’ve got some good ideas,” she says, adding that she hopes details can be nailed down by “later in the year”.
List revisions
King’s other priorities are to ensure that around half a billion dollars in funding from the Northern Australia Infrastructure Fund that Labor has earmarked for critical minerals projects gets allocated, as well as “bedding down” international partnerships.
“The Critical Minerals Compact with the US is of particular importance,” which includes reclassifying Australian suppliers as “domestic” for American defence procurement purposes.
King says she is also open to ongoing revisions of the critical minerals list. “It’s a working document that, at a minimum, gets reviewed very three years. But if there’s a change of circumstances, I would do it tomorrow.”
Amid ongoing calls for greater government support for the critical minerals sector, King says she is determined to spend public money cautiously and get results.
Much of the critical minerals sector has been enveloped by an ongoing cycle of zealous optimism followed by disappointment. Critics lament that too much attention goes to lithium projects at the expense of other minerals.
“I appreciate a lot of people can feel this,” admits King.
“It does feel like there’s a lot of talk and a lot of hype but not always the action people want to see.
“So we’re really committed to getting some of those deliverables.”
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