Australia has the Minerals. Now it Needs the Market.

Max Martin | Australian Foreign Policy Fellow

Image sourced from Peggy Greb via Wikimedia

Australia’s critical minerals challenge extends beyond resource extraction; it is about building a market for non-Chinese supply in sectors where China still dominates processing, pricing, and downstream demand. In Western Australia, Iluka Resources is developing a strategically important piece of infrastructure in the global rare earths supply chain. Its Eneabba refinery is designed to produce separated rare earth oxides, including materials essential for permanent magnets used in electric vehicles, renewable energy production, and defence technologies.

Iluka’s Eneabba refinery is an impressive step toward building domestic processing capacity and moving Australia beyond simply exporting raw minerals. The refinery is part of a broader push by Western governments to build critical mineral supply chains less dependent on China. Its development is supported by government investment in the sector, with part of the funding through more than AU$5 billion in joint Australia-US support for critical minerals projects. However, the true litmus test of Australia’s critical minerals strategy will be whether it can create durable demand for Australian products in a market China still dominates.

Playing Catch-Up

China has treated critical minerals as a strategic industry since at least the 1990s, building technical expertise, processing capacity, and overseas ownership of critical mines and infrastructure. Today, that long-term strategy is clearest in refining, where China accounts for 70 per cent of the global share. For Australia, this means new projects are not entering a neutral market. They are competing against a dominant player with the scale, state support, and supply-chain control to shape market conditions in its favour.

While the West has woken up to its strategic vulnerability, China continues to extend its advantage through acquisitions of overseas mining assets. This includes the acquisition of Australian mining company Peak Rare Earths, owner of the Ngualla deposit in Tanzania, one of the world’s most significant undeveloped rare earth assets. Such acquisitions matter because they allow China-linked firms to consolidate control over future supply before alternative producers can scale.

This market power creates a direct challenge for Australia’s critical minerals strategy. China can use its position to increase supply and pressure emerging competitors before they gain a foothold. The nickel market shows how damaging this can be, where prices declined 73 per cent between March 2022 and May 2025, contributing to BHP and Glencore shutting down their respective nickel projects. Australia’s long-term ability to counter China’s dominance will depend not only on extracting and processing raw materials, but on building markets across the supply chains that use them.

The Limits of Stockpiling

Critical minerals projects, particularly in rare earths, are slow, costly and environmentally complex, making them vulnerable to a dominant market player willing to use price pressure to deter new entrants. Thus, to encourage initial investment and protect projects from artificially depressed prices, Western governments are utilising policy prescriptions such as offtake agreements, tax incentives, and strategic reserves.

Australia’s Critical Minerals Strategic Reserve is designed to respond directly to this problem by turning government into a more active market-maker. The reserve uses AU$1 billion to secure rights to selected Australian critical minerals and on-sell those rights to meet demand from key Australian allies including the United States (US), Japan, and Europe. Furthermore, the Critical Minerals Production Tax Incentive is designed to make domestic processing and refining more commercially attractive by providing a 10 per cent tax offset on Australian processing expenditure. This incentive targets the middle of the supply chain rather than the extraction itself with eligible activities including expenditure on processing and refining.

Strategic reserves, offtake agreements and tax incentives can help projects reach production, but they do not guarantee long-term demand for Australian critical minerals across allied industries. If government-backed purchases simply move minerals into stockpiles, Australia risks creating a reserve-to-reserve system rather than a functioning market.  Avoiding this outcome requires turning government-backed demand into real industrial demand, ensuring Australian minerals are pulled through allied supply chains into magnets, batteries, electronics, defence systems and clean-energy technologies.

Building Demand That Lasts

Australia and its partners need a market in which non-Chinese supply is consistently purchased, processed, and used in downstream industries. The US and its East Asian and European partners all have an interest in reducing dependence on China, but their efforts will be less effective if they remain fragmented.

This should begin with pooling allied demand. Individual markets are often too small to justify expensive new mines, refineries and processing facilities, particularly while Chinese-linked supply remains cheaper. Coordinated purchasing across allies could provide the certainty needed to attract investment. However, a coalition of like-minded nations would create a much larger market for minerals-intensive goods. Coordinated purchasing commitments and common sourcing standards would give producers the long-term revenue certainty needed to attract private capital.

Downstream industries such as electric vehicle production are particularly important because they create large and recurring demand for minerals such as lithium, nickel, cobalt, graphite and rare earth elements. Supporting EV manufacturing, battery production and charging infrastructure in allied markets would do more than advance clean-energy goals. It would also create the downstream demand needed to make non-Chinese critical minerals projects commercially viable. If China’s advantage comes from connecting minerals to manufacturing, Australia must do the same by building the industries that turn Australian minerals into end products.

Max is completing his Master of Arts in International Relations at the Johns Hopkins School of Advanced International Studies (SAIS), where he is a Ramsay Postgraduate Scholar. He spent his first year at SAIS Europe in Bologna before moving to the Washington, DC campus for his final year. Originally from Perth, he graduated from the University of Western Australia with a Bachelor of Commerce in Economics and Finance. A semester abroad at the Vrije Universiteit Amsterdam strengthened his interest in international affairs and motivated further study.

Max recently interned at the Australian Embassy in Bangkok, gaining experience in the political and economic sections at one of Australia’s largest overseas posts. His academic interests focus on the intersection of economics and strategy and how states respond to an evolving global landscape.

Through this Fellowship, he hopes to contribute to public debate on Australia’s foreign policy priorities, challenges, and long-term strategic choices.

Disclaimer: The views and opinions expressed in this article are those of the author, and do not necessarily reflect the views and opinions of Young Australians in International Affairs. All content is original, and no plagiarism has been used in the preparation of this article.  No AI tools were used by this author in the preparation of the article.