On October 21, The United States and Australia agreed to a deal worth $8.5 billion that is designed to increase the supply and trade of rare earth metals. The deal was struck as part of the Trump administration’s response to China’s increasing restrictions over the export and trade of critical metals.
According to the BBC, Australian Prime Minister Anthony Albanese has stated that the deal was struck in order to speed up projects related to rare earth mining and refining, including American investment into processing plants in Australia. To this end, the US has pledged heavy investment into a gallium refinery in Australia. The two nations also agreed to cooperate on conversations related to pricing and sales of companies in the rare metals market. In response to the deal, rare metal companies in Australia saw their shares go up. Arafura Rare Earths, as stated by the BBC, rose about 7.7% on Tuesday.
The leadership of both companies have shown their satisfaction with the deal. According to The Associated Press, US President Donald Trump expressed his opinion that in a year, the supply of rare earth metals will have increased so much that their price would be lowered to about $2. Albanese expressed sentiments that the partnership was key to strengthening the ties between the two countries.
In terms of feasibility, Australia is a strong contender for investment from the United States. According to The New York Times, Australia is estimated to contain around five percent of the world’s rare metal supply. In addition, the country also boasts strong industry and production of said metals, for which Australia accounts for roughly eight percent of the global production. The country’s industry is also quite diverse, with 89 active projects for the extraction of critical metals ongoing. Realistically, however, the timeline for all the promises of the deal to be realized will most likely be multiple years as setting up mines and refineries takes time.
One of the reasons that the US government felt compelled to reach such an agreement with a regional partner in the Pacific is to combat China. According to The Associated Press, China, which is viewed by the United States as a political and economic rival, accounts for 70% of the world’s rare metals mining and roughly 90% of its processing, almost a monopoly. Earlier this month, The Associated Press reported that the Chinese government announced new restrictions on the export and usage of critical earth metals that originated on Chinese soil. These new restrictions state that foreign companies would be required to get special permission to export goods that contain rare earth metals that came from China. This is restrictive due to the fact that these metals have a wide range of applications, from consumer electronics to technology that is used in the military, such as radar. China has justified these restrictions by stating that the regulations were put in place in order to protect their national security, seeing how many of the rare earth metals are being used for military projects.
America’s deal with Australia is only part of its plan to counter China’s near-monopoly on critical metals. According to The Associated Press, the US government has also invested heavily in domestic rare metals companies, as seen with its $400 million investment into MP Materials earlier this year.
As for the US’ deal with Australia, it will have to be seen whether or not the deal can do enough to challenge China’s current dominance over the rare earth metals market.
