Australia Vows to Press Ahead with Critical Minerals Strategy Despite U.S. Policy Shift
SYDNEY, Jan 30 (Reuters) – The Australian government has moved to reassure its critical minerals sector, pledging continued support for domestic supply chains after the United States retreated from proposals to underwrite minimum prices for strategic mining projects.
The announcement follows a report by Reuters that the Trump administration has communicated its backdown to U.S. mining executives, citing a lack of congressional funding and the complexity of setting market benchmarks. The news triggered a sharp sell-off in shares of Australian rare earth miners on Thursday, with losses extending into Friday's session. Lynas Rare Earths, the largest producer outside China, was down more than 4%.
"This development won't stop Australia from pursuing our critical minerals strategic reserve programme," Resources Minister Madeleine King told Sky News on Friday. "Our focus remains on securing the resources Australia needs to build a future made in Australia."
Minister King acknowledged the U.S. had implemented a price floor for one specific project, which she described as a "game-changer," but indicated Australia would chart its own course. The government is considering various mechanisms, including offtake agreements with potential price floors, to support local projects while ensuring value for taxpayer money.
Australia's strategy is explicitly geared towards providing an alternative to China, the dominant global supplier, for minerals essential to electric vehicles, renewable energy, and defense technologies. As part of this push, Canberra has committed A$1.2 billion ($840 million) to establish a strategic reserve for minerals deemed vulnerable to supply shocks.
The reserve, slated to be operational by the second half of 2026, will initially prioritize antimony, gallium, and rare earth elements. Analysts view the move as a critical step in de-risking supply chains for Western allies, even as individual policy tools like price guarantees face political and practical hurdles.
Voices from the Sector
Dr. Evelyn Shaw, Resource Economist at Sydney University: "The U.S. policy shift is a reality check on the fiscal challenges of market intervention. Australia's diversified approach—combining strategic stockpiling with targeted commercial agreements—is arguably more sustainable and market-aligned in the long term."
Michael Tan, Portfolio Manager at Horizon Capital: "The market's knee-jerk reaction highlights the sector's sensitivity to policy signals from major allies. While the long-term thesis for non-Chinese critical minerals remains strong, volatility like this underscores the investment risks and the need for robust government partnership."
Sarah Chen, CEO of a junior exploration firm (who requested her company not be named): "It's incredibly frustrating. We base multi-year, capital-intensive plans on signals of allied support. When a major partner like the U.S. pulls back, it doesn't just hurt share prices—it chills investment and puts sovereign capability at risk. Australia must go it alone if necessary."
David W. Park, Senior Fellow at the Global Security Institute: "This isn't just about economics; it's geopolitics. Australia's resolve to build the reserve is a direct response to supply chain vulnerabilities exposed by recent global tensions. The U.S. may be recalibrating its tools, but the strategic imperative for both nations hasn't changed."
($1 = 1.4278 Australian dollars)
(Reporting by Christine Chen in Sydney; Editing by Thomas Derpinghaus)