The missing piece in Australia’s critical mineral deal lies East

share_windows This article appeared in the Australian Financial Review on October 28 2025.

The US-Australia critical minerals deal makes for a good headline but fails to address Australia’s core economic exposure.

Washington’s anxiety is about the security of supply. Canberra’s, however, should be about a buyer base dangerously dominated by China.

If Anthony Albanese wants genuine de-risking, he will use this week’s ASEAN summit in Kuala Lumpur to build an enforceable pact that creates non-Chinese demand – and shares the cost of building new processing capacity.

Australia’s rare earth pact with Washington last week signals national security. It does not answer a basic question: who will buy, at scale and on bankable terms, outside China?

Defence demand is tiny. It cannot underwrite the multi-billion-dollar mines, refineries and magnet plants required. The private sector alone cannot de-risk billion-dollar investments based on hoped-for demand. A government-facilitated pact is needed to create the bankable offtake agreements and economies of scale that make these projects viable.

The economics still hinge on civilian markets – EVs, wind turbines and electronics – where China sets the pace and price. With limited feasibility of success in these markets, the economic security will be compromised.

Australia is the top exporter of critical minerals, including hard-rock lithium and rare earth products. Almost all of it goes to China for conversion into battery chemicals and magnets.

China’s dominance in mid-stream processing shapes standards, access and margins. Beijing is also tightening the rules. New controls claim extraterritorial reach over rare-earth-related goods, adding legal risk to commercial attempts to build a China-free supply chain.

A good thing for Australia: China still needs Australia’s iron ore, lithium and rare earth exports. It is not going to cut ties over these as it did with wine, beef and grain, where alternatives exist, as the 2020 trade strikes showed.

It, however, can raise the political cost of Australian alignment by deepening security ties in the Pacific—as with the Solomon Islands. In South-East Asia, where governments prize neutrality, Australia risks being seen as a mere extension of US strategy. This perception would hamper Australia’s ability to build the independent coalitions it needs in the region.

The asymmetry is sharp. Australia is urged to bankroll an alternative midstream that Beijing will see as hostile.

Meanwhile, allies with the loudest supply fears can keep their options open—and pivot back to Chinese capacity with minimal sunk costs if politics shift.

The overlooked answer: ASEAN

South-East Asia is not a sideshow. Indonesia is the biggest nickel producer and a rising refiner. Thailand, Indonesia and Malaysia are adding EV assembly and components. Chinese, Japanese and local firms are investing billions in downstream markets in EVs and batteries. Demand is growing off a low base; midstream capacity is scaling fast. This is the best place outside China to anchor new offtake and processing – close to Australia, tied by trade, and pragmatic about partners.

Multilateral institutions should serve as platforms for dialogue, mediating conflicts and promoting cooperative solutions. Albanese should start writing term sheets in Kuala Lumpur with ASEAN partners. He should put it on the ASEAN agenda now. Run a joint feasibility study that maps resources, power, water and permits at the plant level.

An Australia–ASEAN critical-minerals compact must be practical, not performative. It should be constructed on four interdependent pillars:

• Guaranteed Collective Offtake. Instead of hoping buyers will emerge, the pact should secure advance purchase commitments from key ASEAN players—utilities, battery makers, and car companies – for set volumes of Australian critical minerals. This functions as a 'group-buy' pre-sale, providing Australia with a stable sales pathway and guaranteeing ASEAN partners a secure supply. To mitigate the risk of future price volatility, these agreements would operate within a pre-agreed floating price band.
• A Shared Processing Network. It should be recognised that concentrating all processing in any single country isn’t practical. A smarter approach is to create a regional production network, locating different manufacturing stages where costs and skills are best matched. This 'multiple baskets' strategy prevents a single point of failure, builds redundancy across the supply chain, and keeps the final product price-competitive.
• A Common Rule Book. For seamless trade and global credibility, the region needs one clear set of rules. This common framework must cover environmental and social standards and provide traceability from mine to end-product. When all regional regulators and major manufacturers recognise this single “rule book,” trade becomes simpler, faster, and more trustworthy.
• Risk-Sharing Finance. Launching new mines and processing plants requires massive capital and carries inherent risk. To catalyse private investment, Australia and ASEAN should jointly establish a dedicated financial facility. By providing guarantees, absorbing first-loss capital, and offering revenue-stabilising tools, this facility would de-risk projects, thereby attracting private capital, bank loans, and prepayments from large manufacturers into the sector.

Critically, an ASEAN-centric model creates a more resilient and less weaponisable structure. In a regional system with overlapping and mutually reinforcing supply chains, complex dependencies emerge among countries at various stages of the supply chain. While some nations may have greater control over specific parts, no single country dominates the entire ecosystem, making it much harder for any one actor to effectively weaponise economic interdependence.

The option should also be open to China – which should be welcome to join the pact with its technologies, especially lessons learned in waste management and environmental protection.

The ask for Canberra

The US-Australia pact addresses a strategic problem for Washington, but for Canberra, it constitutes a massive subsidy for a market that doesn’t yet exist. The fundamental question remains: who bears the loss if this politically driven supply chain cannot compete with China’s on cost or speed?

On current settings, the Australian taxpayer is the lender of last resort. An ASEAN pact would provide an answer. The success of this pivot should be measured not in the length of a joint communiqué, but in tonnes under offtake, plants financed, and common standards recognised.