China’s influence over the global metals market has reached unprecedented levels, controlling nearly 90 percent of the world’s rare earth processing and production capacity. Countries that are critically dependent on EUMs for their industries (a.k.a., downstream) are staring down the barrel of a gun. At the same time, China has stepped up efforts to lock down their own supplies while massively subsidizing domestic production.
As the single largest source of demand for these metals and more, China has understood the strategic importance of these resources. Equally impressive, the nation has sunk $87 billion into building projects. These initiatives address critical and strategic metals, including copper, cobalt, nickel, lithium and rare earths. This type of investment strategy has enabled China to secure its place atop the global supply chain. In so doing, it has wreaked tremendous havoc on industries in other countries.
Impact on Global Markets
China’s massive subsidizations and shrewd strategy have created a distortion within the global smelter market. In the meantime, the country has scaled up its production capacity. This boom has created a supply glut that is not helpful for international competitiveness. This perfect storm has driven conditions such that non-Chinese producers can’t compete on a level playing field against their heavily subsidized Chinese counterparts.
The competitive landscape is described as “not a level playing field,” according to Troy Wilson, highlighting the challenges faced by countries seeking to position themselves strategically in the market. The oversupply resulting from China’s actions creates significant barriers for other nations attempting to develop their own metal processing industries.
“not a level playing field, with countries trying to take strategic positions in the market” – Troy Wilson
Moreover, China’s rapid expansionism into critical minerals has sounded the alarm bells among Western countries. Labor Leader Peter Malinauskas backed the move, raising concern over China’s consolidation of smelting capacity. He stated, “the Western world to see China consolidate all of its smelting capacity, which means we don’t get to participate in the … critical mineral supply chain in the future.”
Strategic Responses from Other Nations
Now faced with China’s overwhelming dominance, nations across the globe are re-evaluating their own critical mineral strategies and aspirations. Australia’s federal government has emphasized the need for a more rigorous assessment of what constitutes our national interests. Now, they are doubling down on improving their strategic and economic resilience. Tim Ayres highlighted this necessity, suggesting that evaluating these interests is crucial for maintaining competitiveness in an evolving global market.
Nations are understandably keen to make their supply chains more resilient and reduce their dependence on China. This drive is powering a rush on investments for new domestic mining and processing facilities. Australia too is deep in the weeds lobbying to increase their own mining fortunes. This step is intended to ensure a reliable supply of critical minerals. Ultimately, this shift seeks to produce a more equitable, stable international order while pursuing national interests at home and abroad.
Future Implications for Global Trade
The long-term ramifications of China’s uncompromising approach to metal processing reach past short-term economic interests. As other countries try to rebalance against China’s advances, they will find themselves at a serious disadvantage in developing their own competitive infrastructures. The risks of dependency on China’s production capabilities are closely intertwined with supply chain vulnerability risks, especially during times of increased geopolitical unrest.
Countries need to thread a needle. They must navigate a complex landscape of environmental and regulatory hurdles associated with mining and processing activities. Sustainability’s now the latest trend, which can add new layers of complexity to siting new facilities and keeping pace with increasing demand.
