Prime Minister Malcolm Turnbull and four of Australia’s premiers visited Washington last week to build trade connections with the US and discuss a range of security-related issues.
For the most part, however, the talks failed to cover an increasingly important potential dimension of cooperation between the two nations that considers the comparative advantage of both countries rather than a zero-sum game for Australia to partner with either China or the United States.
Mineral resources provide the locus for such a strategic alliance, as Australia is a mineral resource power with an advanced mining industry and the United States’ manufacturing sector desperately needs secure supplies of these metals.
An Executive Order signed by US President Donald Trump last December called for the publication of a list identifying metals that are of importance to US economic and security interests. That list has been prepared and, per the President’s instruction, was released in draft form on February 16.
Given the need for metals in a range of new green technologies and consumer products, many of which are made by leading American companies, secure mineral supply is essential.
As a result, a diverse array of companies from Apple to General Motors is aggressively moving to secure multiyear contracts for these important materials.
A report from the Centre on Sustainable Investment at Columbia University released last week notes that of the six most critical minerals for a transition to a green economy, the US currently has domestic supply networks in place to provide only two of them.
Australia already mines four of the six, and holds promise for one more.
China forging its own regional alliances
A handful of Asian countries — including China — have already put in place coordinated plans for marshalling the financing, mining, and market logistics required to secure these increasingly scarce resources through public-private partnerships.
By contrast, the US and other Western nations have mostly left the production of these materials to the vagaries of junior exploration companies.
While entrepreneurial activity should be encouraged, it should also be channelled through appropriate public sector facilitation between friendly governments, such as the United States and Australia.
Many critical minerals are produced as a by-product of other ore mining operations rather than being the primary objective of the mining operations they come from.
For example, the Columbia report reveals that about 90 per cent of the world’s cobalt is a secondary output from supply networks set up to deliver copper, nickel, and platinum. Cobalt, the report explains, “fails to drive investment on its own financial merits.”
The linchpin strategic role that these metals will play in tomorrow’s economy has not carried with it the kinds of profits that would make them attractive as an investment in and of themselves for today’s mining industry.
What is required to address this growing market failure — and, indeed, what the Columbia report calls for — is a “smart” system that considers the strategic value of these feedstock metals rather than getting hung up on the direct cashflow that these materials can deliver to the companies considering whether or not to mine them.
Towards delivering this kind of holistic perspective, China and a few of its neighbours have put together public-private partnerships that bring together capital and know-how from industry, academia, and government to deliver robust supply networks for these important items.
Green technology aims will fall short
The US and Australia are waking up to the fact that the roll-out of their own renewable energy sources and green transport solutions will fall short if not underpinned by secure supplies for these inputs.
An alliance focusing on research, exploration, development, and the secure sourcing of critical metals between Mr Trump and Mr Turnbull could provide a win-win for both Australia and the United States.
This would be a constructive way for Mr Trump to operationalise the Executive Order on critical metals, and would also provide Mr Turnbull an opportunity to build international confidence in the Australian resources sector.
Furthermore, it would allow both leaders to burnish their tarnished credentials on green technology development.
Robert K. Perrons is an associate professor of Technology Management and Strategy at the Queensland University of Technology; Saleem H. Ali is the Blue and Gold Distinguished Professor of Energy and the Environment at the University of Delaware and a Professorial Research Fellow at the University of Queensland.