The Chinese government has recently banned the export of seven essential rare earth elements which are required for electric vehicles and fighter jets as well as robots which has raised tensions in global trade relations. Australia’s Prime Minister Anthony Albanese promised A$1.2 billion (£580 million) for a vital minerals reserve containing rare earths lithium and cobalt before the upcoming national election. The Australian security measures and those of U.S. and EU allies receive support through this policy response to Chinese export restrictions which analysts interpret as U.S. President Donald Trump’s 145% tariffs on Chinese imports.
Rare earths encompass 17 elements that include samarium and terbium because they serve essential purposes in advanced technology but require difficult extraction and refinement processes. The Australian nation holds the position of major lithium and cobalt producer yet lacks the capability to refine these minerals. During the years from 2019 to 2022 the U.S. received 75% of its rare earth supply from China yet it continues to face significant vulnerabilities due to the deteriorating relationship between the two countries. BBC analyst Philip Kirchlechner emphasized how China’s control of refining functions as a vital lifeblood for U.S. and EU defense systems. The halt in Chinese exports caused Tesla CEO Elon Musk to report how it disrupted their robot development initiatives which proved China’s strong control over these exports.
Analyst Philip Kirchlechner stated that the reserve established by Albanese was overdue but insufficient because China still dominates the refining process. The example shows Australia extracts 33% of worldwide lithium deposits yet does minimal refining while China refines 57% of lithium while extracting less. Under the Future Made in Australia plan Australia has committed A$840 million for Arafura Rare Earths to build its mine-refinery and Lynas Rare Earths to establish its new processing plant in Western Australia. According to the Center for Strategic and International Studies Australia needs to rely on Chinese refining services until at least 2026.
The Australian investment demonstrates its determination to expand refining capabilities yet the process to compete with China’s current market control will extend into multiple years. The reserve provides improved supply chain reliability to allies yet its effects are constrained by the absence of reliable refining capabilities. Australia needs to overcome its refining bottlenecks to both support global energy transitions and limit China’s strategic dominance while the country’s mineral wealth faces increasing demand from green technology development.
