Critical Minerals: A new currency?
Critical minerals are seemingly no longer just the key ingredients of batteries and wind turbines, they’re becoming a currency of geopolitical power. As China tightens its grip on supply chains, from rare earths to graphite, Western governments are scrambling to shore up alternative sources, pumping billions into projects that promise resilience but often deliver little beyond rhetoric.
Australia, sitting atop vast deposits, is touted as a potential cornerstone of this new order. But with costs rising, approvals dragging, and markets flooded by Chinese oversupply, the question is whether Australia can turn potential into strategic leverage or risk being left behind.
The battleground is as much about policy as geology. The US and others talk of “friend-shoring” and “de-risking,” but building processing plants, securing offtake agreements, and funding new mines takes years that China has already spent consolidating dominance.
Australia finds itself caught between rhetoric and reality, being hailed as a trusted supplier yet still reliant on Chinese buyers and processing infrastructure. Investors, meanwhile, are left to weigh up bold government announcements against market realities. The narrative of critical minerals as the new oil is compelling, but without decisive moves, Australia risks being a spectator rather than the race leader.
For evidence, look no further than the rare earths market. China produces about 60% of the world’s mined supply but controls more than 85% of processing. When Beijing restricted rare earth exports to Japan in 2010, it sent shockwaves through global markets.
Today, that same leverage extends to graphite, where China dominates anode material production, and cobalt, through extensive investments in Africa’s copper belt. Western policymakers are aware of the risks, however their response is sluggish and fragmented.
Subsidy programs in the US and Europe are seemingly generous on paper, but projects are slow to materialise. Australia, despite its resource abundance, hasn’t managed to capitalise meaningfully on this geopolitical moment, not yet at least.
The Albanese government has made critical minerals a central pillar of its “Future Made in Australia” policy, announcing funding for lithium, rare earths, and downstream processing projects. However, approvals can stretch for years while capital expenditure requirements soar. Conversely, Chinese-backed projects often benefit from state financing, vertically integrated supply chains, and guaranteed offtake even if only stockpiling.
The result is that Australian juniors, despite strong geology, can be left hamstrung by weak margins and a lack of patient capital. Recent closures in the mineral sands and rare earths sectors highlight the risks when Chinese supply floods global markets.
The disconnect between ambition and execution carries broader risks. If Australia cannot develop the downstream processing and refining capacity that allies are calling for, it risks remaining primarily an exporter of raw ore, with limited value captured downstream.
That outcome would weaken the strategic case for Australia’s role in global supply chains and undermine its bargaining position with partners. Worse, it would leave Canberra caught between the competing pressures of U.S. allies demanding secure supply and Chinese buyers remaining the most reliable market in the near term.
For investors, the landscape is equally challenging. Some ASX-listed names stand to benefit if government backing accelerates, particularly those in lithium hydroxide and rare earth separation.
But volatility will remain a constant. Oversupply, shifting subsidies, and the pace of technological change all add elements of uncertainty. So too does the lure of risk money away from critical minerals, particularly as investors chase gains in gold with its enduring record high pricing and strong sector tailwinds.
The winners will be those companies able to secure long-term offtake agreements with non-Chinese buyers, tap into government-backed financing, and move quickly into production. The rest of the field risks remaining stuck in the pre-development pipeline as capital dries up.
Ultimately, critical minerals are more than a mining story, they are about sovereignty, security, and strategic alignment. Australia has the resources, the technical expertise, and the geopolitical goodwill to be a leader in this space. But potential alone will not secure its place in the new order.
Without faster approvals, stronger financing pathways, and the political will to compete with China’s scale and speed, Australia risks finding that the much-discussed critical minerals opportunity could be dwarfed by the hype. In a world where supply chains are weapons, standing still is not an option.
