A week earlier, Albanese was in Washington, where he participated in a not-so-subtle effort to reduce his country’s dependence on China when it comes to vital minerals.
Albanian and US officials have announced a raft of measures to direct Australia’s huge stockpile of critical minerals – metallic elements and metals essential for clean energy technologies and some advanced weapons systems – away from processing in China and instead sending them to new factories in their countries.
“China has a head start, and that means we have to work a little harder and a little faster,” US Commerce Secretary Gina Raimondo warned during an event with Albanese.
She continued: “They have the technology and sustainable investment… to control the market for critical minerals.” “We all know that if China signals this new direction that is unfavorable to us, it could cause a great deal of pain, very quickly.”
Albanese’s language was more cautious ahead of his trip to China, which begins Saturday in Shanghai, the first by an Australian prime minister in seven years.
But Australian officials are also concerned that Beijing will cut critical mineral supply chains – a move that could cripple the world’s transition to cleaner energy and undermine China’s military adversaries.
“China, with its market dominance, has restricted trade in” critical minerals in the past, Madeleine King, Australia’s resources minister who also traveled to Washington, told the Washington Post. “So we have to open our eyes wide about the possibility of imposing these restrictions. “If we don’t diversify, we will be indebted to them in the future.”
In China, the flurry of cooperation between the United States and Australia in the field of vital minerals raises concerns that military cooperation between them may creep into areas that threaten Beijing’s bottom line at a time when the Chinese economy is suffering.
“Under constant pressure from the United States, the foundation of Australia’s previous balanced policy of relying on China for the economy and relying on the United States for security has been eroded,” said Yu Li, a professor of international politics at Shandong University. State-owned tabloid Global Times.
The clash over critical minerals is just one front in the simmering geopolitical competition between Beijing and Washington. The two superpowers are increasingly vying for influence in the Asia-Pacific region, where China’s growing military power and assertiveness have spurred new US security initiatives, including a revived Quad and a landmark agreement to supply nuclear-powered submarines to Australia.
In perhaps his most visible move, President Biden blocked sales of advanced computer chips and chip-making technology to China last year.
The “chip war” threatened to spread to critical metals. China recently announced export controls on Two metals Used to make semiconductors and GraphiteIt is the key to electronic vehicle batteries.
Among the announcements during Albanese’s trip to Washington: A US loan amounting to $150 million For an Australian company building a graphite processing facility in Louisiana and 100 million dollars US grant to another Australian company that produces synthetic graphite in Tennessee.
These moves, along with others already underway on rare earth elements, are part of a broader global trend toward protectionism and “friend support” and away from free markets that has accelerated during the Covid-19 pandemic.
In the case of critical minerals, US and Australian officials say China already exercises near monopoly control.
“It’s not a free market,” King said. “China has taken control of this, and they can control any operation they really want because of the nature of their regime.”
China hosts more than half the planet’s production of minerals used in electronic vehicles, including lithium, cobalt and manganese. It is the world’s leading graphite producer and exporter, refining almost all of the world’s graphite supplies. State-owned companies have cornered the market on rare earth elements needed for supermagnets used in advanced weapons systems.
“We are now in a cold war primarily on the trade front,” said Jeff Green, a defense industry consultant and lobbyist in Washington. I think the US government responds in kind. “It is working with allies like Australia, the UK and others to try to undo this.”
China first flexed its significant mineral muscles in 2010, when, amid a maritime dispute with Japan, it suddenly cut rare earth exports to Tokyo. Trading resumed two months later, but when a mine in Mountain Pass, California, tried to start exporting rare earths to Japan, Chinese state-owned enterprises flooded the market, crushing prices and the American start-up, which eventually filed for bankruptcy.
China did the same thing with the Australian company Lynas, which would have collapsed had it not received help from the Japanese government.
For many years, Lynas was the only major rare earth producer independent of the supply chain in China. It has a processing plant in Malaysia but is now building one in Texas after its American subsidiary received a $258 million grant from the US Department of Defense.
The Mountain Pass mine has also reopened and begun processing rare earth elements, thanks to Department of Defense funding.
Australia announced a similar deal last year, granting a loan worth about $700 million to Australian company Iluca to build a rare earth element processing plant Down Under. In Washington, Albanese announced an additional $1.3 billion in loans available to important Australian metals companies.
Kim Beazley, the former Australian Defense Minister, said it was time for his government to step in to boost local processing of critical minerals, rather than sending them to China.
“The Chinese have made absolutely certain through their political art that if a rival starts, he will be eliminated,” he said. “So we practice a little statecraft as well.”
in Recent paperBeasley warned that a conflict with Beijing could lead to China cutting off the flow of vital minerals. He called for more important cooperation on minerals within AUKUS, the trilateral security partnership that includes Australia, the United Kingdom and the United States. He said that through investment, Australia could supply the trio with critical minerals for joint weapons systems for decades.
“We are a good ally, we know where the central weakness lies and we have an answer for it,” he said.
More American investment could come. Biden asked Congress to add Australia and the United Kingdom as “domestic sources” under the Defense Production Act. This would open up new investment and export possibilities for important Australian minerals companies. They may also be eligible for money from the inflation-reducing law passed last year.
Jane Nakano, a senior fellow at the Center for Strategic and International Studies, said Australia deserved the domestic designation given how important it has become to the United States in recent years. It supports diversification of supply chains for critical minerals, but cautioned against moving too aggressively to marginalize China.
“It would be very difficult to try to exclude China from the picture without causing major disruptions to the deployment of clean energy technologies, not just in the United States but elsewhere by having commodity prices skyrocket or become extremely volatile,” she said.
US and Australian efforts to reduce dependence on important Chinese minerals could backfire, said Marina Zhang, an associate professor at the University of Technology Sydney.
“Critical mineral supply chains, in the context of climate change, may be one of the few areas where the United States and China can reach an agreement to work together,” she said.
At the same time, Australia was in a “very critical situation”, torn between economic interests and national security interests, Zhang said. It may be years before Australia and the United States are able to process the amount of critical minerals they currently send to China, and even then, the products will be more expensive.
She and Nakano agreed that the issue was unlikely to come up in Albanese’s meeting with Xi, as neither country had reason to raise the issue at the moment. But Zhang was concerned about the possibility of intensifying competition in the minerals arena.
“This tug of war, this strategic competition, seems to be getting worse recently,” Zhang said. “So we don’t really know what’s going to happen.”
Megan Tobin and Pei-Lin Wu in Taipei contributed to this report.
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