Australia considers minerals price floor to counter China dominance
Australia is exploring the introduction of a price floor mechanism for critical minerals, including rare earths, as part of a strategic initiative to reduce China's market dominance and attract international investment in domestic mining and processing operations.
Resources Minister Madeleine King outlined the policy framework during discussions in Washington DC, where international officials convened for a critical minerals summit. The mechanism would be supported by Export Finance Australia, the government's export credit agency, to provide market stability for producers facing volatile pricing conditions.
"We will work to ensure Export Finance Australia has the appropriate financial instruments to implement price floors," King stated, emphasising the need for greater market certainty in a sector heavily influenced by Chinese supply dynamics.
Strategic mineral reserves and global competition
Critical minerals, including rare earths, serve as essential components in defence systems, electric vehicles, renewable energy infrastructure and advanced technology manufacturing. China currently maintains near-monopoly control over processing and refining operations for many of these materials, previously utilising supply leverage during trade disputes.
According to US Geological Survey data from January 2025, Australia holds the world's fourth-largest rare earth reserves at 5.7 million metric tons of rare-earth-oxide equivalents. China leads globally with 44 million metric tons, followed by Brazil at 21 million metric tons and India at 6.9 million metric tons.
Minister King acknowledged Australia's processing capacity deficit, noting the country "was well behind China in processing and refining of rare earths and would need to work diligently to catch up." She highlighted the resources sector's historical reliance on foreign investment for development.
International coordination and stockpile initiatives
The Australian policy deliberations coincide with broader Western efforts to reduce Chinese supply chain dependence. US President Donald Trump recently announced "Project Vault," a proposed $12 billion strategic stockpile initiative, while the European Union considers a critical minerals partnership with the United States.
Australia plans to establish a smaller A$1.2 billion critical minerals stockpile, initially focusing on rare earth elements, antimony and gallium. These materials are considered vital for defence applications and high-technology manufacturing.
The initiative builds upon a landmark 2025 agreement between Australia and the United States to enhance American access to Australian rare earths and strategic minerals. The US previously offered price floor guarantees to one key producer, though broader support mechanisms remain under development.
Investment opportunities and market response
The Australian government has launched an online investment prospectus featuring 49 mining projects and 29 processing facilities described as "investment-ready." Minister King indicated capital could flow through equity investments, debt financing or long-term offtake agreements.
Financial markets responded positively to the policy announcements. Sydney-listed critical minerals companies experienced significant gains during Wednesday morning trading, with Lynas Rare Earths rising 6.9 per cent, Iluka Resources gaining 5.2 per cent, Arafura Rare Earths up 6.3 per cent, and Sunrise Energy Metals jumping 10 per cent.
The price floor mechanism represents a significant shift in Australia's approach to critical minerals development, potentially providing the market stability necessary to attract long-term investment in capital-intensive mining and processing operations.