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Australia’s government has bailed out Trafigura’s lead and zinc smelters to stave off their collapse on the condition that the global commodity company pushes to develop a new supply chain for critical minerals.
Canberra is also considering setting a floor on the price of rare earths and some critical minerals to underpin the viability of projects as part of a wider policy to break China’s grip on the strategic sector.
The plan, pledged during Prime Minister Anthony Albanese’s election campaign this year, is aimed at carving out a role for Australia as an important non-Chinese supplier for the global defence and energy industries.
China dominates the refining and supply of rare earths and certain critical minerals, which has prompted countries including Australia, the US and Canada to seek alternative supplies of minerals used for electric vehicle batteries, wind turbines and defence systems.
Price floors are being considered to foster the development of new projects, according to a spokesman for Australia’s mining minister.
The government is under pressure to help many of the country’s metals smelters stave off collapse as a result of high energy costs, lower market prices and, in some cases, competition from Chinese rivals for raw materials to produce refined metals.
The federal government, alongside the state administrations of South Australia and Tasmania, said on Tuesday that it would provide Nyrstar — a unit of Trafigura — with A$135mn ($87mn) of funds to stave off the collapse of the country’s only lead smelter in Port Pirie and largest zinc smelter in Australia, located in Hobart.
The funds will help Nyrstar modernise the facilities with a focus on producing critical minerals from the byproducts of zinc and lead. That includes antimony and bismuth at Port Pirie in South Australia and germanium and indium at Hobart in Tasmania.
Antimony is used to produce armour piercing ammunition and night vision goggles, while germanium is used in the production of semiconductors. China introduced export restrictions on both minerals last year in response to US trade restrictions.
South Australia’s premier Peter Malinauskas, who was holding a piece of antimony at a press conference about the bailout, said governments needed to weigh the use of taxpayer funds against Australia’s national security.
“The counterfactual would be to allow the western world to see China consolidate all of its smelting capacity, all of the world’s smelting capacity, which means we don’t get to participate in the . . . critical mineral supply chain of the future,” he said. “That’s an unacceptable risk, particularly in the current geostrategic environment.”
Huw McKay, a visiting fellow at the Australian National University, said that the government needed to ensure that funds provided to smelters were conditional on the owners “liberating” byproducts such as antimony that have until now been “left in the slag” due to the cost of competing with China.
McKay said that would help justify using taxpayer money to bail out smelters. “The government needs leverage in the global market. These byproducts may be small in volume but they could be highly impactful from a national resilience perspective,” he said.
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