Alliance politics, commercial asymmetries: Rare earth supply chains and the US-Australia Critical Minerals Framework

Executive Summary

The October 2025 US-Australia Critical Minerals Framework matters because it begins to turn alliance intent into practical instruments: finance, purchase commitments, price support, stockpiles and project selection. Rare earths are its central focus.

Rare earths are used in small quantities in electric vehicles, wind turbines, robotics, electronics and defence equipment. But these industries depend on them. China dominates the processing of rare earths and the manufacture of magnets, so a disruption to a relatively small amount of material can interrupt much larger industries.

The US and Australia have different but complementary problems. The US has a supply problem: it needs reliable access to critical minerals outside China. Australia has a demand and capability problem: it has resources but lacks the domestic market, processing ecosystem and downstream customers needed to sustain a complete rare earth industry.

This report answers a simple but important question:

Will closer cooperation with the US help Australia develop lasting industrial skills and production capabilities, or will it remain mainly a supplier of raw and partly processed materials?

What the report finds

A more secure supply chain does not necessarily mean a stronger Australian industry. Australia will gain lasting benefits only if it secures dependable customers, shares financial risks with partners and develops its own processing expertise and industrial capabilities.

• Projects are advancing, but announcements are not the same as delivery
  
  The framework has progressed beyond statements of intent. Lynas, Nolans, Eneabba, Browns Range and the proposed Wagerup gallium facility have attracted government finance, customer commitments or strategic interest. Australia’s Critical Minerals Strategic Reserve could also coordinate purchases and help protect selected projects when prices fall sharply. However, political backing alone cannot fund a multibillion-dollar project. Companies need reliable future revenue.
  
  Announcements, memoranda and letters of interest can improve confidence, but they are not equivalent to approved finance or contracts that require buyers to purchase material.
  
  
• Secure supply does not guarantee Australian capability
  
  The US and Australia agree on the need to diversify away from China. But they have not settled where the new jobs, technology and profits will be created.
  
  Australia could make a US-led supply chain more secure while still missing its most valuable stages. Mining, separation and refining may take place in Australia, while metals, alloys, magnets and customer relationships are developed elsewhere.
  
  Australia also bears substantial costs, including finance, infrastructure, environmental approvals, waste management and possible friction in its relationship with China. Agreements must therefore spell out where technology, skilled jobs and manufacturing will be located, project by project.
  
  
• A security premium becomes real only when contracts allocate risk
  
  Producing rare earths outside China generally costs more. Labour, energy, approvals and waste treatment are more expensive, and new projects lack the scale, supplier networks, expertise and customers built up over decades in China.
  
  Governments may be willing to pay more to reduce dependence on one supplier. But that willingness helps a project only when it is set out in a contract.
  
  The strongest agreements guarantee a minimum price, commit the buyer to a set quantity and last long enough to help the producer secure finance. They shift part of the risk of weak prices or low demand from the producer to a customer or government.
  
  

• Replacing Chinese capital means replacing an industrial system
  
  Chinese investment in mineral projects has often come with loans, long-term purchase commitments, access to processing facilities, technical support and connections to manufacturers.
  
  The US and its partners tend to provide these services through different government agencies and companies. Developers must bring funding, technology, customer contracts and price protection together into a package strong enough to attract investment.
  
  Australia therefore needs government support and customers across several countries. Swapping dependence on China for dependence on a single US market would create another risk rather than genuine resilience.
  
  

• Decoupling is layered rather than complete
  
  No single rule applies to every business relationship with China. Different regimes examine ownership and control, technology and intellectual property, material origin, customer concentration, the destination of output and whether a product is intended for civilian ordefence use.
  
  US defence procurement, US government finance rules and Australia’s foreign investment regime each apply different tests. This produces selective restrictions rather than a complete break in economic ties. The strictest controls apply to defence, sensitive technologies and strategically important processing. Ordinary commercial relationships may continue where Chinese involvement is transparent, does not confer control, is not exclusive and could be replaced if necessary.
  
  The goal should not be to end every Chinese connection. It should be to identify which dependencies create unacceptable risks of outside control or supply disruption.
  
  
• Australia must also prepare for changes in US policy
  
  Rare earth projects take years to build and repay. They will operate through several US administrations.
  
  US support is valuable, but it should not be treated as permanent. Policy priorities, subsidies and procurement decisions can change. Many US arrangements involving Australian projects also last for less time than the mines and refineries they are intended to support.
  
  US defence demand can make projects more credible and provide some price support, but defence demand alone cannot sustain an entire Australian rare earth industry. Australia needs commercial buyers in Japan, South Korea, Europe and other markets as well.
  
  A multinational buyers’ consortium could combine demand, share the cost of price protection and reduce dependence on any one government or customer.
  
  
• Judge progress by results, not announcements
  
  The framework should not be judged mainly by the value of announced finance or the volume of minerals shipped to an ally.
  
  Instead, its success should be measured by whether Australia develops:
  ◼ commercially viable mining and processing projects;
  ◼ reliable and diversified customers;
  ◼ processing expertise and technical skills;
  ◼ products that have passed customer qualification;
  ◼ skilled employment; and
  ◼ the ability to choose among markets.
  
  

What Australia should do

Australia should apply two sets of rules within one global market. One, stricter rules for defence and other sensitive uses, and two, more flexible rules for ordinary commercial products. This would reduce dangerous dependencies without trying to cut all economic ties with China.

1. Protect supplies for defence and other sensitive uses
   
   The high security category should cover defence, sensitive technologies and critical infrastructure. It would require trustworthy owners and financiers, records that trace materials through production, approved suppliers, emergency reserves and priority access during a crisis.
   
   The government should clarify which investment and business relationships are allowed, restricted or prohibited. If a security rule forces a project to give up funding, technology or customers, policymakers should help identify workable alternatives at the same time.
   
   
2. Keep civilian markets diverse
   
   The commercial category should cover electric vehicles, renewable energy and other civilian manufacturing. Here affordability, scale and diversified demand matter more.
   
   Australia should not apply defence-level restrictions to every critical minerals transaction. Chinese firms could remain involved if their participation is transparent, does not give them control and can be replaced. Civilian industries, including clean energy manufacturing, should be able to sell into a range of markets.
   
   The two categories need not use entirely separate facilities. They could share mines, refineries, infrastructure, workers and suppliers, with tighter rules for sensitive products on where materials come from, how they are tracked and who buys them.
   
   
3. Use access to minerals to secure lasting Australian expertise
   
   Australia’s mineral resources and government funding give it bargaining power. In exchange, it should seek enforceable commitments to long-term purchases, minimum prices or take-or-pay terms, technical knowledge sharing, selected manufacturing activity in Australia, workforce training, customer approval and access to overseas manufacturers.
   
   Australia does not need to recreate every part of China’s rare earth industry. It should focus on the capabilities that are strategically important, commercially viable and difficult to replace.

Making the approach work

Australia’s federal, state and territory governments have different but linked responsibilities. The Commonwealth oversees national security, foreign investment screening, international agreements and major financing programmes. States and territories oversee land, infrastructure, energy, approvals, employment and regional development.

These decisions need to be coordinated. If one government rules out a source of finance or a customer before another can help provide a replacement, the project and its local community may bear the cost.

The aim is for secure supply chains to make Australia more capable and less dependent, not simply dependent on a different country.