In the fantasy world of the Albanese Labor government’s ‘renewable energy superpower’ dreams, yet another unachievable critical minerals policy change, linked, of course, to renewables, was quietly introduced late last month. At a time of an Australia-wide survival crisis for the country’s metals and minerals processing industries, with multi-billions of dollars of governmental handouts already being directed to saving these locally strategic and major export industries from going broke (mainly, but not entirely, due to net zero’s huge energy cost rises) and with more huge handouts required next year if vital lead/zinc smelters in Hobart and Port Pirie are to be saved, Resources Minister Madeleine King announced that Albanese’s three-year-old Critical Minerals Strategy needed to be ‘adjusted’. So instead of this 2023-30 support program concentrating, as it has, on supporting the mining of critical minerals that have strategic significance, the focus is to change to their smelting and processing. In an exercise of hope over experience, success will require foreign buyers of what will inevitably be relatively expensive processed Australian critical minerals to pay a premium rather than buy cheaper product from supply-chain-dominating China. If they, particularly the US, don’t wish to pay that ‘supply-chain-safety’ premium, the consequence would be a need for continuing Australian taxpayer subsidies just to keep the processors going in a repeat of what is now the multi-billion-dollar support for processors of aluminium, lead, zinc and copper – and the closure of nickel and manganese processing.

For this revised strategy to pay off, geopolitical tensions rather than market forces will need to dominate the future of processed critical minerals and metals. This month’s US midterm Congressional rout indicates that some changes in the geopolitical climate may be in the air; last year’s highly promoted, but light on detail, $13-billion Trump-Albanese deal to support critical minerals in both nations leaves unanswered the key question of whether the US would pay a premium over cheap Chinese, Indonesian or other China-dominated producers, to buy more expensive Australian processed product. So while Australia’s biggest metal smelters are at risk of closing (or have done so) because they cannot compete due to rising energy bills and cheap Chinese competition, naturally, Minister King made no mention of the impact of the Albanese government’s net zero energy cost rises on mineral processing when adjusting the Critical Minerals Strategy, which, in an effective high energy cost kiss-of-death, seeks ‘to use critical minerals to support the net zero transformation’. Updating the strategy is aimed, she said, at dealing with the ‘significantly changed global context of concentrated market power, export controls and geopolitical competition that have disrupted supply chains that modern economies rely on…. Shifting more focus toward smelting and processing will guide the next phase of industry development, with an emphasis on capturing more economic and strategic value… particularly in areas where Australia has or can build comparative advantages…. It places greater emphasis on national security, economic resilience and focuses on international partnerships, and targets government effort where it can have the greatest impact across the critical minerals value chain’. With Australia’s long-established and previously successful major processors finding it no longer economic, without governmental support, to upgrade Australia’s rich mineral resources and needing taxpayer bail-outs to avoid closure, the government’s latest vision is ‘not simply to extract critical minerals, but to capture more value from our resources, strengthen sovereign capability and support long‑term economic growth. This means expanding processing and refining where Australia can build a comparative advantage, support new project development, and ensure the sector contributes to broader national priorities.’

This policy change follows last year’s strong criticism of Albanese Labor’s minerals strategy by the government-created Australian Strategic Policy Institute (ASPI) that most of the strategy’s funding remained focused on extraction. ‘The absence of large-scale investment in processing reflects a policy gap that will see us fall short of our obligations to allies and trade partners, who need diversified, reliable sources of critical minerals. Our national interest lies in moving up the ladder from extraction to processing and eventually to manufacturing. But ASPI’s politically attractive strategic vision comes at a potentially politically unacceptable cost. As the current processing crisis indicates, the concept is easier said than done.

The very factors that have failed to sustain our collapsing traditional minerals processors are now being touted as making Australia ‘uniquely placed in combining significant critical minerals resources with world‑class mining expertise, a stable investment environment and growing processing capability. Together with our strong international partnerships, these strengths position Australia to become a supplier of choice for the industries and economies that depend on critical minerals’. In the Panglossian world of Albanese’s strategic vision, ‘by 2030, Australia will be a globally significant producer of extracted and processed critical minerals. This will help strengthen Australia’s national security and economic resilience, diversify supply chains and support energy security, the global transition to net zero, and a Future Made in Australia’. But will they be competitive in world markets or will taxpayers have to foot a subsidy bill?

Meanwhile, back in the real world, Australia’s minerals and metals processing crisis stumbles on at a multi-billion-dollar cost to taxpayers, with some critical mineral by-products of smelting, such as antimony, bismuth, tellurium, germanium, and indium being at risk – while nickel and manganese are dead. In February last year, the South Australian and federal governments announced $2.4 billion (with more to come) to keep the Whyalla steelworks alive. In October, the Queensland and federal governments granted $600 million in assistance to Glenmore’s Mt Isa copper smelter and Townsville refinery and then this March, in yet another attempt to offset net zero’s soaring energy costs, they spent a further $2 billion bailing out Rio Tinto’s Boyne Island aluminium smelter. In August, Australia’s largest aluminium smelter, Tomago, secured $2.5bn in federal and NSW taxpayer aid but could receive further federal funding with Canberra’s contribution to the facility’s new rescue package remaining uncapped – and the prospect of promised cheap Snowy Hydro power as part of the deal looks far from assured after the Snowy’s latest cost blow-out and further delay. And doubts have emerged about the effectiveness of last month’s joint state-federal $200-million bailout of Bell Bay aluminium smelter with workers reportedly being offered redundancies last week. The multi-million-dollar temporary repeat rescues of the lead and zinc smelters at Port Pirie and Hobart (one of the world’s largest zinc smelting complexes), face reality early in the new year while recent temporary help for Tasmania’s manganese smelter operation (Australia’s last remaining one) did not prevent last month’s closure. And BHP’s once world-leading nickel operation closed to care and maintenance two years ago and also faces its final fate in early 2027.

Domestic upgrading of Australian minerals and metals to processed state is a worthy ambition. But in the current environment of self-inflicted absurdly high energy costs and hostile state-sponsored uneconomic competition, is attempting to subsidise Australia’s way to success simply peeing dollars against the economic wind?