ECONOMIC Australia's abundance of critical minerals may derail our relationship...

Australia’s abundance of critical minerals may derail our relationship with China


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The war officially may be over. But the battles rage on.

The uneasy truce between Australia and the People’s Republic of China reached just over a month ago amid an outpouring of mutual goodwill in Beijing, has done little to alter the fundamental differences between the two nations.

Skirmishes over influence in the Pacific aside, frictions once again have begun to emerge over that most vital connection with Beijing; the trade in mineral resources.

It has manifested on two fronts. The first is the re-emergence of old accusations that Australia is profiteering from sky-high iron ore prices.

The second is an escalation of hostilities in the race to tie up the supply and refining of critical minerals.

While Australian iron ore escaped any meaningful trade sanctions, largely because, unlike wine and lobsters, it provided the essential fuel for Beijing’s ambitious economic growth, Chinese authorities once again are attempting to intervene in iron ore markets to halt a rapid price escalation.

But the new and potentially more damaging frontier in trade hostilities is critical minerals, both in lithium — crucial for battery production — and rare earths, which provide the material for magnets essential for the transition to renewable energy and for military purposes.

It just so happens Australia has abundant supplies of both lithium and rare earths. China, meanwhile, has had a stranglehold on critical minerals for years, which puts us smack in the middle of a geopolitical tug of war between America and the Middle Kingdom.

China is the biggest consumer of iron ore and produces steel that is used in construction.(Reuters: Tingshu Wang)

Beijing’s iron will, Australia’s gain

Hostilities over iron ore have been arcing up for well over a decade, ever since BHP’s Marius Kloppers led the charge to jettison annual price-setting negotiations and shift instead to market pricing.

The ensuing massive price escalation saw the profits from China’s huge economic stimulus and rapid expansion flow to the Australian mining giants and then into the Australian government’s tax coffers along with an enormous global investment in new Australian mines.

Try as they might to stem the cash flow, Beijing authorities were powerless, only adding to the angst.


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