The trade war with China continues to dominate headlines.
Yet there is no depth to it. It focuses on the short term, like the so-called “Phase One” deal.
Never mind that there is no actual “Phase Two” to mention. Or that it is just a slight rollback even if it goes ahead.
Even less mentioned are the other facets in play: Chinese ambitions in the South Pacific, economic capture through debt owed to China throughout the world, Chinese pressure on tech companies and infrastructure, etc.
Perhaps the most important for military, technology, and trade going forward is the rare earth situation.
It seems like a foregone conclusion that China dominates the trade. It is presented as a fait accompli.
It is an untenable situation with no easy solution, so it languishes out of sight and out of mind, at least in the public’s eye.
However, there is some movement on this front, and it very well could be the start of something big.
As much as the U.S.A. seems hopelessly entangled with China, Australia has it worse.
Australia is being rocked by a Chinese spy scandal and worries that its commodities exports — a third of which go to China — could be affected by it and many other sources of souring relations.
That only serves to amplify the importance of the news that just came from Washington D.C.
Commerce Secretary Wilbur Ross and Australian Minister for Resources Matt Canavan have agreed to work together on financing projects for critical minerals, including rare earth minerals, lithium, and other commodities.
This came just a day after the U.S. Geological Survey and Geoscience Australia agreed on a joint plan to map and assess critical mineral reserves in both countries.
The report also highlighted a need to work with other longtime allies like Canada and Japan on exploration, processing, and recycling to reduce Chinese dependence.
It truly is a win-win situation. Australia clearly wants to lessen its reliance on feeding raw commodities into Chinese refineries, only to need to buy the finished materials back.
The U.S. has a desperate need to secure new sources. Though lithium mining is seeing a resurgence in the Southwest, there is only one large rare earths mining operation, a private venture, that also ships ore to Chinese refineries.
Private sector companies have a hard time in this sector. Exploration and transitioning to full-fledged mining operations are capital intensive and risky. Refineries are incredibly expensive and the risk of not hitting key scales of economy has stifled investment.
Expanding agreements on how to fund and develop this critical sector among key allies could give the nudge needed to get over these high hurdles and break this deadlock.
It couldn’t have come at a better time, except for maybe 10 years ago.
The threat of Chinese market manipulation through cutting off exports, which it has done in the past, or ramping up production to depress prices, which it may be trying to do now, is only going to get worse.
The U.S.A. and Australia need a comprehensive agreement to go forward. It is a good sign that the will to get one done is there. Let’s hope the will to follow through is as well.
Rare earth and lithium production is going to ramp up outside of China one way or the other. This situation will eventually resolve itself.
The question is if we will plan and support development or if we will continue to let global supply of minerals critical to our economy and military be dictated by China’s communist party elite.
Companies in the right place to capitalize on this geopolitical shift are poised to see their share prices soar either way.
