In recent times governments have claimed that “critical minerals” can do more than Flex Tape. Are you worried that governments will stop supporting coal jobs? Don’t worry, critical minerals will replace them.
Are you concerned that we won’t be able to balance government budgets if we lose coal and gas royalties? It is ok, demand for copper, nickel and lithium will mean new royalty streams that will make us even richer.
As Anthony Albanese recently said in December last year, “Critical minerals are the building blocks for a clean energy future and we are determined to seize this economic opportunity to support local businesses and local jobs”.
Like much of the net zero story, the lived reality has turned out to be much different than the promises made.
The first chinks appeared last year when, far from benefiting from increased demand for nickel, Australia lost its last nickel refinery and smelter. Over 10,000 jobs were lost.
That tragedy occurred because despite increased demand for nickel in electric vehicle batteries, increased supply from Indonesia undercut our supplies using cheap coal fired power.
Instead of using the cheapest form of power BHP decided to produce “green” nickel. BHP never received the premium it was expecting for trying to save the planet.
The same, tragic story is now repeating for copper, and other Australian metals industries.
Just as for nickel, China has financed a massive expansion of copper smelting capacity that is putting the viability of copper facilities in other countries at risk. As the International Energy Agency (IEA) recently concluded, “the [copper] concentrate deficit was predominantly driven by a surge in new smelter capacity in China, pushing spot treatment and refining charges (TC/RCs) to record lows as smelters competed to secure copper concentrate”.
The treatment charge is what a smelter gets paid for processing copper ore into a more concentrated form. Or, they normally get paid, but thanks to the Chinese induced overcapacity, treatment charges are now negative.
The massive decline in these charges has already led Glencore to shut its smelter in the Philippines. Glencore has said that it may also need to pause production in Mount Isa and Townsville without government assistance.
But it is not just copper. China now produces more than 90 per cent of the world’s rare earth and graphite refined products. China produces nearly 80 per cent of refined cobalt and over 60 per cent of refined lithium. China is the dominant refiner in 19 of 20 critical minerals recently examined by the IEA.
China has used enormous levels of government support and ownership to generate this concentration. While many countries have talked a big game on diversifying away from Chinese supply chains since COVID there are not many success stories.
The only way we can win is to fight fire with fire and support our own industries lest they fall foul of China’s predatory tactics.
This will require substantial levels of government support. And given the fairytales that governments have told Australians about critical minerals in recent years, I am not sure people are ready to support such levels of assistance.
This is one reason I have proposed a Senate inquiry into metals manufacturing. Such an inquiry would be a vehicle to explain to people why these production facilities are important and why there is a need for government support.
The production of metals is also crucial to Australia’s coal industry. Many miners work across different commodities so if some industries fall there will be a surplus of skilled people seeking work in coal.
Our coal is the key to keeping metals jobs in Australia too. Making metals can be simply explained as the application of enormous quantities of energy to rocks to make them more valuable. If we are to keep a metals manufacturing industry over the long term, we need to start using Australian coal again so that we deliver the cheapest possible power to deliver the highest number of well-paid metals manufacturing jobs.
Hon Matt Canavan
Senator for QLD
