WEEKLY E-MAIL

30 May 2023

AUSTRALIAN MINERALS TO PLAY CRITICAL ROLE IN GLOBAL ENERGY TRANSFORMATION

By Amelia Paullo

On Saturday, 20th May, Prime Minister Anthony Albanese and President Joe Biden signed a US-Australia Climate, Critical Minerals and Clean Energy Transformation Compact during their G7 conference in Hiroshima.

The Compact is a framework designed to advance ambitious climate and clean energy action at home and abroad. This framework aims to coordinate policies and investments to support the expansion and diversification of responsible clean energy and critical minerals supply chains that underpin global decarbonisation.

The Compact will need to go before the US Congress for approval, and if approved as expected, this commitment to enhancing bilateral cooperation between Australia and the US could prove to be very significant economically.

Just like the enormous growth in investment in the iron ore industry from the 1960s and the more recent growth in our LNG industry, Australia has the potential to build a new industry that will support future jobs and national prosperity.

The increasing global demand for critical minerals is an unmissable opportunity for Australia’s resources sector to become a critical minerals and renewable energy superpower. Australia is in the enviable position of holding some of the world’s richest deposits of critical minerals like lithium, cobalt, vanadium, and significant deposits of rare earth elements. These minerals are crucial to clean energy technologies such as electric vehicles, storage batteries, solar panels, wind turbines, and a range of high-tech, defense and medical applications.

The US has the capital and strategic weight needed to help Australia extract and process those essential critical minerals and rare earths, and to create the necessary supply chains to ensure our critical minerals are available to the world. The Compact proposes that Australia be treated as a domestic US supplier under the Inflation Reduction Act, opening up new investment and export possibilities for Australian critical minerals, clean tech and energy transition materials.

The Inflation Reduction Act of 2022 is turbocharging the US energy transformation with upwards of USD$500bn in federal investment and tax breaks in clean energy initiatives. The economic significance of Australia being listed as a domestic source cannot be overstated. The shift would allow closer technological collaboration on critical minerals and rare earths and facilitate the flow of American capital to certain Australian projects.

The International Energy Agency projected mineral demand for use in electric vehicles could grow by around 3000 per cent between 2020 and 2040. At the same time, lithium demand could increase by about 4000 per cent, with demand for graphite and cobalt growing by 2000 per cent to 2500 per cent, respectively.

The recent commitment by US chemicals giant Albemarle to double its Kemerton WA lithium hydroxide refinery to a world-leading 100,000tpa capacity perfectly illustrates the strategic opportunity for value-adding to Australian resources pre-export, working in partnership with US and foreign investors.

The joint US-Australia release also announces the formation of the Quad Investors Network, comprising public and private stakeholders from the group’s four nations of India, the United States, Japan and Australia.

This should enhance other cross-border investments, technology and domestic supply chain developments, particularly Australia’s bilateral strategic focus on building financial and political ties with India.

As one of the largest electric vehicle markets in the world, the opportunities for Australian critical mineral alliances with Indian corporate leaders such as Mukesh Ambani’s Reliance Industries, Gurdeep Singh’s NTPC and Dr. Praveer Sinha’s Tata Power are large with the right political support.

Importantly, the new US-Australia Compact will help to ‘crowd-in’ an influx of private capital, potentially leveraging and mobilising Australia’s massive A$3.4 trillion of superannuation assets to accelerate investment into clean technology and renewables.

Amelia Paullo
Financial Planner
Authorised Representative No. 1243426

If you have any questions or comments, please email me at amelia@gfmwealth.com.au

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