Australia expects more allies to sign up to its critical minerals reserve

By Melanie Burton and Peter Hobson

MELBOURNE (Reuters) -Australia is seeing more interest in its strategic critical minerals reserve from allies including the European Union since it signed a deal with the United States last month, Australia's trade minister said on Wednesday.

Canberra signed an agreement with Washington in October aimed at countering China's dominance in critical minerals needed for industries spanning artificial intelligence to defence systems. It included an $8.5 billion project pipeline and leverages Australia's proposed strategic reserve, which will supply metals like rare earths and lithium that are vulnerable to disruption.

"Having seen what we've done with the Americans, I think there's increased interest from the Europeans, from the Japanese, from the South Koreans, Singaporeans, in what we're doing in this space," Minister for Trade and Tourism Don Farrell told Reuters in an interview on the sidelines of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) meeting in Melbourne.

"Particularly the Europeans don't want to miss out."

Australia is seeking to leverage its strategic importance after China restricted some rare earths exports in April in response to U.S. tariffs, amplifying global concerns about supply chain vulnerabilities.

The resource-rich Antipodean nation, wanting to expand into processing from its base of mining critical minerals, put preferential access to the reserve on the table in U.S. trade negotiations.

The deal between the two countries also pledged to set a minimum price floor for critical minerals.

Without a price floor, companies will struggle to be competitive with China, which is able to produce the minerals cheaply due to the massive scale of its industry.

But customers who have already secured supply, such as Japan, may be less keen. Japan was an early investor in Australia's Lynas, now the largest rare earths producer outside China.

"I imagine those people, in that situation, might be the ones that might be arguing against moving down this path," Farrell said.

"But I think if we're going to end up in a situation where people can reliably invest in these sorts of developments, then there has to be some security at the end of it."

INCREASED PRESSURE FOR EU TRADE DEAL

Australia and the EU recently revived talks for a sweeping free trade agreement, after a previous attempt fell apart in 2023.

Australia is eager to boost agricultural exports by removing EU tariffs and expanding quotas, with Europe likely to gain greater access to Australia's critical minerals industry.

The same stumbling blocks are still there, but pressure to overcome them is greater now, Farrell said.

"The job over the next couple of days is to see whether we can find a common ground there, where our farmers get greater access but don't ultimately threaten the livelihoods of European farmers," he said.

"Given the changed international circumstances of trade, the adults in the room have to demonstrate to the rest of the world that it is still possible to do free and fair trade and to reach agreements."

(Reporting by Melanie Burton and Peter Hobson; Editing by Kevin Buckland)