On the surface there is little in common between these two manufacturing inputs. However, there are two commonalities
First: Australia has plenty of both in its raw form
Second: Australia currently and into the future has little or no chance of being a significant supplier of the end value added product.
Australia remains a significant contributor to the world’s supply of raw wool. In volume we are now second behind China. In value we are the runaway leader after 100 years of genetic management leading to a fine and consistent wool staple, ideal for the manufacturing of high-end clothing. We do only a tiny, artisan level of processing of the raw wool in this country. Over time we have outsourced this dirty, effluent heavy process to India and China.
Sadly, the huge value add to wool occurs after the initial processing of the raw clip, and we are not getting any of it, beyond a few scraps.
In the case of rare earth minerals, we have plenty in the ground, very little of which is being mined currently, and very little of what is mined is processed.
These science fiction sounding minerals occur at very low concentrations, requiring hundreds if not thousands of tonnes of earth being mined and processed to deliver very small amounts of the final product. The subsequent processing is capital intensive, uses toxic chemicals, consumes vast amounts of water and energy, and for neodymium in particular, the critical component of high performance magnets, emits vast amounts of CO2 during processisng. . As a result, we have the raw material, but no way to add the value.
China has a stranglehold on the world supply of these minerals, controlling around 90% of processing and around 70% of the volume of mined material for subsequent processing. Over 20 years China has invested heavily in generating this chokehold on the critical inputs to a modern economy. 20 years start gives them immense price and availability leverage over the industrial activity of the rest of the world, which increasingly requires those science fiction sounding rare earth elements in the manufacture of a vast range of products.
In recent days China has changed the rules on the mining, processessing and export of products made with rare earth elements. The technology required to process the raw materials, and the manufacturing technologies necessary to produce end products are now all subject to licenses being given by the Chinese government. If nothing else, this should scare the wits out of the loonies in the White House.
While building a lather abour rare earch minerals, we should aslo remember the dominence China now has in minerals that are not classed as ‘rare earth’. Managnese, Cobolt, Graphite, lithium, and others.
It would be a brave man to predict any change in this situation in anything less than decades, hundreds of billions invested, and really politically sensative choices being made about the environmental impacts that expansion of non Chinese supply would entail.
The Australian government has announced a ‘Critical minerals strategy’ that includes a Critical Minerals Strategic Reserve. This all sounds appealing, but the acid test will come the first time a mining enterprise proposes to mine an area that is the last habatat of some rare insect, and add CO2 to the atmosphere by establishing a pilot processing plant. The last time the government got involved with supply chain management of a raw material with a view to controlling price and availability was with the wool industry. That ended up as an absolute disaster, and would be logarithnically easier to get right than it will be to bridge the gap with rare earth minerals..
A ‘Critical Minerals Strategy’ sounds like a good idea, is a better sound bite, but is a practical hurdle of enormous proportions. However, China;’s diminence should be seen as a challenge to be met with application of the pool of sceiontific and mining intellect we have ion thoscountry. We must find a pethway to making the existing lead China enjoys redundant by the generation and application of scientific understanding.
