International | Jul 19 2023
Australia and the US have signed a deal that gives Aussie companies access to Inflation Reduction Act subsidies with both countries joining forces in a bid to outrun China in the Greentech race.
-Latest deal between Australia and US gives Australian companies access to Inflation Reduction Act subsidies
-Australia-US agreement might become template for other countries who'd like to join the US' inner circle
-China’s dominant position in refining and processing raw materials makes it a strong competitor in the global scramble for mining assets
-Battery makers working hard to reduce usage of cobalt
By Richard Acello
Australia and the United States have inked a Greentech development deal that will join Australian mineral resources and American business opportunities to create Greentech products.
The US is trying to jump start a domestic market for electric vehicles, which rely on lithium batteries for power. Australia is the source for roughly half of the world’s lithium, and is a major producer of copper and zinc, which are crucial to the electrification economy.
Most importantly for Australia, the agreement allows for Australian firms to be treated as US domestic companies to receive incentives and subsidies US firms enjoy under the green investing provisions of the Inflation Reduction Act, passed by Congress in 2022.
Australian Prime Minister Anthony Albanese said that without the agreement’s support measures, Greentech would have a “massive incentive” to be headquartered in the U.S.
“The big risk with the Inflation Reduction Act […] is that you’ll see capital leave Australia to go to the United States,” Albanese said. “This is about addressing that.”
Albanese said the agreement was the “largest action by any country” to tackle climate change and bolster clean energy investment. Briefly, the agreement will further development of solar, wind and storage technology, develop new battery types, and emerging hydrogen markets.
The agreement also positions Australia among a small group of countries with which the US has free trade agreements.
Geopolitical strategist Peter Zeihan says the agreement may be a template for other Greentech deals.
“There’s been a real hullabalooo about which countries can get access (to Inflation Act incentives) and which can’t and Australia is a tight ally, part of the inner circle,” Zeihan noted.
“What the agreement attempts to do is build a parallel supply chain independent of China for processing of raw materials into metals and intermediate products. The minerals are right there, and you could do solar in the outback, there’s a lot of upward potential, they just need the investment and a decision to move up the value added chain, you’ll have US-Australian fusion projects located on both sides of the Pacific.”
Other countries expected to join include South Korea and Japan, which already have trade deals with the US and may be able to join Australia as part of the “inner circle".
“Who will not be joining is the European Union,” Zeihan states. “An EU-US free trade deal has been flirted with, but never really gone anywhere. EU countries like France are highly protectionist and the idea of exposing themselves to US market is something they are not willing to consider.”
Zeihan describes the EU as an aging society, so the US has no rationale for a trade deal with Europe because they would be product dumping on the US. Japan and Korea are also vital to US interests in Asia. “So there’s definitely an inner circle and an outer circle among the allies and when it comes to Greentech only the inner circle can play,” Ziehan concludes.
At the same time, China has decided to ban the export of metals used in Greentech and semiconductors to the US, which Zeihan called “knee jerk, freshman level economic coercion” unlikely to have much effect.
Meanwhile, battery makers are attempting to fine tune their products by reducing cobalt content as much as possible while increasing nickel and manganese, according to a recent report from S&P Global market intelligence.
"To put it simply, they want to cut costs by using less cobalt while maintaining and increasing energy density," Mo Ke, CEO and chief analyst at RealLi Research, told Commodity Insights.
Among nickel manganese copper (NMC) batteries, nickel-rich chemistries maintain energy density but reduce the safety of the battery, the report said. “Nickel-rich versions of the NMC battery, such as series 811, are already being adopted by battery manufacturers and automakers and are expected to comprise 25% of all batteries sold in 2024,” quoting market forecasts by E Source, a utilities research firm.
The International Energy Agency says China’s “dominant position” in refining and processing raw materials makes for a strong competitor in the global scramble for mining assets.
"As the world's largest metal refining hub, China heavily relies on imports for large volumes of raw materials, often from a small number of sources," the IEA's Critical Minerals Market Review 2023 report noted.
The report says China is the top producer of processed copper, cobalt, lithium, graphite and rare earths and the second-largest processor of nickel, after Indonesia, but its sources for raw materials are highly concentrated.
China depends almost entirely on the Democratic Republic of Congo for importing unprocessed cobalt, on the Philippines and Myanmar for around 80% of its nickel and tin, respectively, and on Australia for 60% of its lithium.
"China is therefore seeking ways to diversify its raw material supply portfolio," the report said. "The country has been actively investing in mining assets in Africa and Latin America, and started investing in overseas refining and downstream facilities, with an aim to secure strategic access to raw materials."
For example, between 2018 and the first half of 2021, Chinese companies invested US$4.3bn in mining assets, twice the amount of American, Australian and Canadian businesses combined, the report said.
Not everyone is on board in the effort to mine the planet of minerals for green projects.
In Humboldt County, Nevada, the People of Red Mountain — Paiute, Shoshone, and Bannock people from the Fort McDermitt Tribe — are litigating against President Biden’s green program by seeking to stop the extraction of lithium from the Thacker Pass Mine.
According to a report by Mighty Earth, the mine site has a “history of massacres resulting in many ancestors’ bodies buried in the land.” The report claims the government failed to adequately consult with regional tribes in consideration of any cultural impacts the mining would have on the sacred site and to any of the indigenous peoples spiritual practices.
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