The race around value-adding to minerals isn’t with China. That race is over. China is decades ahead in mineral processing, not to mention, it can open new mines faster and has cheaper energy and labour.

Industrialised economies are feeling the pressure of supply chain disruptions — particularly disruptions to the supply of critical minerals.

It’s no wonder critical minerals are top of the agenda: they’re needed for defence, energy and advanced tech, and China controls most of the supply.

Minerals are also one of the few areas where there could be inroads with the US on trade deals — Prime Minister Anthony Albanese and US President Donald Trump’s recent phone call highlighted critical minerals co-operation, and Australia has had a critical minerals accord with the US for some time.

What Australia, the US and other partners can do to secure their access to minerals has been the subject of debate for years — the vulnerability to China withholding rare earth elements or manipulating prices to drive out competition is widely recognised within the industry. This dynamic came to a head for the US this year, when a series of events led to the biggest public investment in a rare earths miner.

In response to Trump’s April 2 “liberation day” tariffs and export controls, China withheld rare earth elements and magnets, forcing some US manufacturers and the defence industry to halt or slow production.

Pivoting, the US paused tariffs on China and reversed its ban on China’s access to some Nvidia computer chips. Subsequently, China eased its ban on shipments of rare earth elements to America.

But the US learnt the lesson and, in July, the US Defence Department announced a $550 million, mostly equity investment in rare earths miner, MP Materials. The investment is a game-changer.

The bottom line is that no single government or group of countries can secure all the minerals needed for all their various uses.

Providing MP with equity, plus guaranteeing offtake and setting a floor price, won the trifecta: it boosted industry confidence and drove up share prices for Australian industry players. But the move also puts pressure on Australia to follow suit and raises a bigger question: how sustainable are these public investments, and how far-reaching (across America’s list of 50 critical minerals and Australia’s list of 35 critical minerals) should these investments extend?

The bottom line is that no single government or group of countries can secure all the minerals needed for all their various uses — the best they can hope for is to secure a handful, perhaps five, that they can create an end-to-end supply chain ex-China. It’s likely the Australian Government’s proposed strategic mineral reserve, currently in the design phase, will identify heavy rare earths and possibly the three Gs — gallium, germanium, and graphite — to stockpile. Removing China from some critical minerals supply chains will be the only way to guarantee the supply of those inputs.

The government has spent several billion dollars and committed even more to support Australian rare earths companies, such as a $1.65 billion flexible, non-recourse loan to Iluka and a $50 million equity investment in Liontown Resources. Serious conversations are happening around government financing bodies taking more equity stakes, which would offset the risk for banks and super and attract their finance. Experienced economists trained on decades of free trade and comparative advantage will hate it. It’s a necessary investment.

The imperative starts from a national security perspective. Heavy rare earth elements are needed for defence capabilities — capabilities that are in even higher demand now, given new wars and potential future ones. There are more than 4 tonnes of critical minerals in a Virginia-class submarine, for instance. But further Australian investment in critical mineral supply chains goes beyond defence. It’s essential for Australia’s economic competitiveness and to avoid being left behind in the global race to extract more value from raw materials.

Australia must continue pursuing solutions to the critical minerals challenge — but at pace.

While creating non-Chinese supply chains for national security is the driving force, the race around value-adding to minerals isn’t with China. That race is over. China is decades ahead in mineral processing, not to mention it can open new mines faster and has cheaper energy and labour.

Australia’s race is with countries such as Vietnam, Indonesia, the US, Canada, Europe and others — all of which are looking to increase their domestic processing. Once the finite market outside of China is flooded with processed mineral ores, there will be no market left for Australia to capitalise on. CSIRO’s Dr Chris Vernon uses the analogy of a game of musical chairs: there are only so many chairs, and when the music stops, Australia could be left without a seat.

For economic and security reasons, Australia must continue pursuing solutions to the critical minerals challenge — but at pace. Inaction and a wait-and-see approach characterised the previous decade for Australia, but geopolitical factors this decade are forcing our hand. A combination of things — including domestic investment, US support through project finance and offtake, and working with trusted country partners in strategic groups that can act as buyer’s clubs — will provide some answers.