Vince Connelly (Stirling, Liberal Party) Share this | Hansard source

Today I rise to speak about the importance of critical minerals, particularly in Australia and into our future. Global supply chains have been rocked by COVID-19. While Australia has done comparatively well, we have not been immune, and supplies of many important goods have been strained. For some goods, this has been reasonably quick and easy to solve. For example, when we needed more face masks, resources were diverted towards domestic manufacture, and we were quickly able to solve those related problems. For other goods, however, shifting to domestic supply is much harder. We currently import 90 per cent of medicines, and the manufacturing of complex molecules that are safe for humans can't simply be easily switched on and off. We need to assess our broader supply chain risks and opportunities. Sadly, the 21st century has already seen several incidents of trade being used as a diplomatic weapon. The pandemic has compounded geopolitical relationships that were already under pressure, and the risk of trade restrictions being used as a foreign policy tool has substantially increased. Diversifying our export commodities and markets is therefore essential. We need to grapple with an uneasy realisation that, along with cost, supply risks and national resilience are extremely important considerations. Australia can and must adapt to this new reality and be prepared for future shocks. We can and must become more resilient.

The Parliamentary Joint Standing Committee on Foreign Affairs, Defence and Trade has opened an inquiry into the strategic implications of COVID-19. The terms of reference for this inquiry include the identification of practical measures for an effective national resilience framework that will underpin Australia's economic and strategic objectives. I wish to speak about one of these measures: the full realisation of Australia's critical minerals potential. This has rightly been recognised as one of six key national priorities in the modern manufacturing strategy announced in the 2021 federal budget. I know that this is welcomed by Australian critical minerals companies such as Northern Minerals, in my home state of Western Australia. Critical minerals are those that are essential to the economy or national security of a country and have supply chains that are prone to disruption. Supply risk factors include production being concentrated in one or only a few countries, which are able to manipulate prices and export quantities; a lack of suitable substitutes; and a high risk of supply disruptions due to civil unrest, environmental factors such as floods, or political interference.

Those risk factors mean that critical minerals markets are almost always highly volatile. Almost all modern technology contains at least one component that requires a critical mineral. Consider our beloved smartphones. The touch screens are made of a film that contains indium. The microphones have neodymium magnets. Praseodymium, terbium, yttrium and gadolinium are used to make the vibrant colours in the displays. They're hard to pronounce, but all of those critical minerals are extremely important. Our National Broadband Network wouldn't work without the germanium that is added to the core of fibre-optic cables.

As the world looks to renewable energy, it's important to note that critical minerals are vital components of those technologies as well. Magnets made of neodymium, dysprosium, samarium and praseodymium are needed in wind turbines. Dysprosium stays magnetic at high temperatures, so it is used in electric cars to increase their efficiency, as well as their range. Vehicle manufacturers are concerned about the supplies of cobalt and lithium, which are important components of batteries. The list is endless. Basically, if something is new and innovative, more efficient and better for the environment, then it contains critical minerals. Although critical minerals are essential to modern technology, the amounts required are often minuscule. An electric car, for example, contains about 100 grams of dysprosium. The critical minerals trade is small compared to the trade in bulk commodities, like iron ore and coal.

Production concentration can make critical minerals a useful political weapon. An exporting country can restrict or halt supplies at little cost to its own economy. This will inflict significant damage to large value-adding manufacturing industries in importing countries. Japanese manufacturing is heavily reliant on rare-earth minerals, almost all of which are mined and processed in China. In 2010, during a dispute over the sovereignty of the Senkaku Islands, Beijing halted exports of rare earths to Japan. That sent a clear message to Japan and also to the rest of the world: 'Your economies need rare earths and only we produce them.' In the aftermath, the US took an assessment of its own economy and the findings were stark. If China or Russia were to stop exporting critical minerals for a protracted period, that would cause a significant economic shock to both the US and its allies.

The consequences are not just economic. There are critical minerals in a wide range of modern weaponry, including missiles and radar and targeting systems. As the world transitions to a low-carbon future, our current fleet of petrol and diesel vehicles will be replaced with electric or hydrogen models in the next 50 years. Whichever countries manufacture the billions of replacement vehicles will capture a significant slice of future economic growth. This leads us back to the 100 grams of dysprosium that I mentioned are in every electric car. Almost all dysprosium is currently produced in China. That will undoubtedly result in that country capturing a bigger share of electric vehicle manufacturing and/or gaining leverage over other nations that rely on dysprosium as a critical input to their own production. Australia has recently begun to produce rare earths on a modest scale and we have the capacity to produce a great deal more. This will reduce our economic reliance on our exports of raw materials, particularly iron ore and coal, and boost domestic manufacturing.

Countries right around the world are waking up to the importance of critical minerals to their economic wellbeing. The US is import-reliant on 31 critical minerals and, in 2017, President Trump signed an executive order implementing a critical minerals strategy for the US. The EU's critical raw minerals list defines 27 critical minerals, India considers itself reliant on 12 and Japan on 31. Australia also has a critical minerals strategy that was developed in 2019. While the major economies of the world are scrambling to secure their supplies, our strategy aims to position Australia as a reliable supplier. Around the world, there's a growing realisation that Australia has something that the rest of the world needs. We recently signed a memorandum of understanding with India, agreeing to work together to increase trade investment and R&D in the critical minerals sector. At the same time, Australia is working actively with the US towards a joint action plan, and this joint action plan will improve the resilience and the diversity of global critical minerals supply chains.

Realising this immense potential isn't as simple as commissioning another mine though, so the government is right to fund research and development of innovative ways to reduce costs, such as new drilling techniques or the use of big data to better target prospective deposits. In the near term, we also need to position ourselves as a preferred supplier for high-end manufacturers. In the medium to long term, our aim should be to shift value-adding manufacturing onshore. Most value is added after the mining and processing stages, and too much of that occurs outside of Australia. The Modern Manufacturing Strategy will assist in shifting value-adding activities onshore. Once produced, active trade diplomacy is also needed to develop our export potential. Investors need to be encouraged to take advantage of the opportunities Australia has to offer. The Department of Foreign Affairs and Trade's efforts in this area are beginning to bear fruit. The Critical Minerals Facilitation Office has been set up for that purpose, and Austrade and the export credit agency also assist with investment into Australia.

Our mines will always need skilled geologists, engineers, explosive experts and competent operators, so it's also vitally important that we turn our attention to developing and maintaining an appropriate skills base here in Australia. A vibrant and adaptable education centre is going to play an essential role. If we are to progress to manufacturing in Australia, our university, TAFE and apprenticeship programs must be able to meet those needs and build our processing and manufacturing know-how.

We also need to think beyond just the minerals sector. We are an extremely large country and, whilst our wide open spaces are undoubtedly a blessing, remoteness does increase the costs of doing business. Australia's Critical Minerals Strategy rightly recognises that broader infrastructure investment is required to better connect remote Australia to roads, rail and ports. This will reduce the cost of doing business and increase the viability of projects in remote areas. Processing, refining and manufacturing are all energy intensive activities, so reliable and affordable energy will improve Australia's competitiveness in these areas and help us to capture more of the downstream value chain.

The blow delivered by COVID-19 has been substantial and has laid bare shortcomings in our supply chains. It is absolutely essential that Australia meets this changed world, as it is, with the confidence to make our own changes to secure our own better future in which we can continue to prosper. Clearly, as outlined today, critical minerals are going to play an important role in securing Australia's future—for the value that's added in mining these critical minerals, which are plentiful in Australia; for the value which will be added by processing more onshore; and for the value that will be added as we seek to export more processed critical minerals to the rest of the world. We must be able to withstand future shocks. We must be able to sustain critical goods and services during disruptions in an economically changed world. Although this will undoubtedly be a challenge, Australia has every reason to be rightly optimistic. We can produce critical minerals to meet our own future needs as well as the rest of the world's, and that will further enhance our enormous comparative advantage which we enjoy in mining and processing here in Australia.

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