The Australian government’s new $1.2 billion critical minerals stockpile plan appears to be more of a political statement than a transformative industrial policy.
While some headlines have framed it as a billion-dollar mining windfall, the real intention seems to be signalling, both to domestic voters and international allies, that Canberra is serious about supply chain security in the face of China’s dominance in mineral refining.
The initiative’s core proposal is simple: use government funds to purchase and hold reserves of key minerals like lithium, rare earths, cobalt, nickel and graphite.
These purchases act as a form of insurance, shielding the country against potential future export restrictions, such as China’s 2010 rare earth embargo. Or Beijing’s more recent restrictions on germanium and gallium. The move also sends a market signal that long-term contracts with Australian miners are underwritten by federal support.
However, the plan does not address some of the deeper structural problems in the critical minerals sector.
Notably, it does not invest in expanding Australia’s very limited refining and processing infrastructure. Without scaling up these capabilities, stockpiling unprocessed ore leaves the bottleneck—China’s near-monopoly on midstream processing—unchallenged.
The $1.2 billion figure may sound large, but it is relatively modest compared to the global critical minerals market, which is valued at over US$300 billion annually. For context, the amount set aside might secure around 25,000 to 30,000 tonnes of lithium carbonate, less than 3 per cent of global demand in 2024.
This makes the reserve more of a defensive hedge than a vehicle for industrial transformationThe core issue remains the “processing gap” rather than a mining shortfall.
China continues to refine roughly 95 per cent of rare earth oxides and more than 75 per cent of battery-grade lithium chemicals worldwide. So while stockpiling ore may reduce some geopolitical risk, it does not change the fact that the majority of value-added processing still takes place overseas.
Adding to the challenge, the capital costs for building new midstream facilities are enormous. For example, just one integrated lithium hydroxide plant—like the expansion by Albemarle in Western Australia—requires $2 to $3 billion in investment.
In that light, Canberra’s much larger $7 billion in tax credits for production might be the real game changer, though these have been given less public attention.
Another critical factor is the slow pace of project approvals in Australia. New mining operations often face environmental permitting processes that last between three and five years. Without reforms to fast-track approvals and build necessary infrastructure, there is a risk that the stockpile might end up filled with imported material rather than Australian output.
Coordination with global allies is also vital. The US, for instance, is taking similar steps through executive orders tied to its own defence stockpile. If countries do not align their reserves through common quality standards and shared release protocols, their efforts may end up working at cross purposes.
An alternative approach could make the stockpile more strategic. Rather than being a passive buyer and holder of raw materials, the Australian government could require that any company receiving funds commit to processing the material domestically within a set timeframe. This could incentivise the growth of a downstream sector.
Combining stockpiling with a loan guarantee program—similar to those under the US Defense Production Act or the EU’s Critical Raw Materials Board—might also lower financial barriers and attract private investment.
Furthermore, the reserve could prioritise materials with the greatest strategic leverage, such as rare earth elements used in magnets like neodymium and dysprosium, rather than focusing mainly on bulk lithium.
Finally, protocols for releasing stockpile materials should be designed in coordination with allies like Japan and the US, much like how petroleum reserves are managed collaboratively.
In conclusion, while the $1.2 billion stockpile plan is a solid defensive move, it falls short of being a comprehensive industrial strategy. Stockpiling alone cannot overcome Australia’s current reliance on overseas processing, especially China’s.
For it to have a lasting impact, the stockpile must be part of a broader policy framework that includes faster permitting, stronger processing incentives, support for exporters and close cooperation with allied countries.
Without these additional elements, the plan may buy time during the next trade disruption, but it will not resolve the vulnerabilities that made such a reserve necessary in the first place.
Dr Ehsan Farahbakhsh is a Postdoctoral Research Fellow with the EarthByte Group in the School of Geosciences at the University of Sydney, where he applies machine learning and data science techniques to mineral exploration.
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