The demand for electric vehicles (EVs) is characterized by volatility and political influence, with approximately half of all sales directed to the top 10 percent of counties that lean most towards democratic values.
In the face of declining prices in lithium and nickel operations, it’s worth reflecting on the fact that the ongoing emphasis on critical minerals in political and policy discussions may be overlooking the commodities that have been the backbone of Australia’s economic prosperity for over 150 years. From the gold rush in the 1850s to the surge in iron ore exports in the 1960s and the recent mining boom, the mining sector has consistently been the primary driver of Australia’s economic growth, providing a sturdy foundation during global economic challenges such as the GFC and the fiscal impacts of COVID-19.
However, recent data from the Australian Bureau of Statistics (ABS) reveals that the capital stock of the mining industry has stagnated over the past seven years. This isn’t due to a lack of demand for commodities, as the purchasing of gas, coal, steel, aluminum, and copper has been on the rise.
A combination of regulatory, tax, and industrial relations policy changes has tarnished Australia’s reputation as an attractive investment destination, leading to a flow of investments to our competitors. Instead of working to restore our competitive advantage, successive governments have been more inclined to seek the next big thing, particularly in critical minerals like lithium.
While critical minerals are valuable, they represent a niche market and are unlikely to match the export numbers of iron ore and coal, which generated over $250 billion in revenue last year. For example, lithium exports, valued at $20 billion in the 2023-24 financial year, are expected to drop by 50 percent due to the collapse in lithium prices.
Several indicators point to ongoing challenges for critical minerals. The World Economic Forum noted a plateau in the global energy transition, as governments hesitate to impose the costs associated with this transition on their electorates. Predictions about the demise of fossil fuels and the widespread adoption of electric vehicles (EVs) also face challenges, particularly in markets like the US where consumer behavior is not aligning with optimistic projections.
In light of these uncertainties, it’s crucial to consider focusing on minerals with the largest international markets and the greatest economic returns, such as iron ore, gold, aluminum, and copper. Additionally, coal, gas, and uranium, despite facing political challenges, should not be overlooked.
To maximize national economic benefits, emphasis should be placed on existing downstream processing, particularly in aluminum and copper. The development of green steel technologies, like Element Zero, could bring significant economic and environmental advantages. Similarly, Australia, with one third of the world’s uranium deposits, should position itself as a preferred producer as the global interest in nuclear energy grows.
Addressing the challenges in the mining sector, including uncertainty around environmental approvals, rising energy costs, and industrial relations issues, is crucial. Streamlining environmental approval processes and exploring innovative energy solutions, such as small modular reactors, could help meet the electricity demands of mining and mineral processing operations.
Australia’s reliance on the mining sector is enduring, and it remains the sector where the country can assert global leadership. However, focusing on a limited group of politically attractive commodities poses a potential threat to this leadership position.