Australia’s minerals stockpile to tackle ‘distorted’ rare earths market

The federal Labor government, re-elected in May, first announced the A$1.2 billion ($780 million) initiative in April during the closing days of its campaign. The plan aims to establish a stockpile of critical minerals to bolster national and allied supply chains. Initially met with limited detail and scepticism, the policy has started to take shape.

Australia’s only neodymium-praseodymium producer, Lynas Rare Earths (ASX: LYC), was among the first to raise concerns. Managing director Amanda Lacaze told The Australian Financial Review in April that the reserve could distort pricing and undercut domestic producers.

Speaking last week at a mining event in Perth, Resources Minister Madeleine King pushed back on that criticism.

“It’s been interesting, to say the least, to see some commentators claim that the government will distort market prices when these markets aren’t functioning properly in the first place,” she said.

Stockpile details emerge

King announced that the reserve could be operational by July 2026. She said the government may accumulate small, temporary stockpiles of select critical minerals, depending on market conditions. Participation will be voluntary, and the focus will be on securing strategic off-take agreements rather than propping up unviable projects.

“Off-take agreements are intended to secure supply of priority minerals for strategic reasons,” King said. “But naturally, certainty of off-take may also help in some cases. I would expect the reserve will generate cash flow from sales to key partners and deliver a return to government.”

A task-force of government and industry representatives will now be formed to hash out how the reserve will operate, including pricing, structure and storage locations.

Australia’s official list of critical minerals includes 31 commodities, but King noted the list wouldn’t necessarily dictate the stockpile. It will depend on global market dynamics, geopolitical factors and feedback from industry, she said.

CEOs cautiously optimistic

Wyloo Metals CEO Luca Giacovazzi described the reserve as a potential “hybrid” between free-market dynamics and government intervention, particularly in the context of China’s dominant role in pricing.

“There’s an opportunity here, depending on how it’s designed, for government to act as an aggregator of material and negotiate country to country,” he said, “rather than relying on individual companies that are small and less competitive alone.”

Australian Strategic Materials (ASX: ASM) managing director Rowena Smith agreed that government aggregation could de-risk investments.

“Overseas investors and off-takers are nervous about relying on small players,” she said. “If the government steps in and helps secure commitments, that could enable this sector to scale up and begin production.”

Giacovazzi stressed the importance of allowing the government room to refine the policy, adding that he doesn’t believe the stockpile will subsidize uneconomic projects.

“This isn’t a simple problem to solve,” he said. “They should be commended for trying something creative.”

Lithium sector scepticism

Not everyone is convinced. IGO Ltd. (ASX: IGO) CEO Ivan Vella pointed to historical cautionary tales, including the government’s failed wool reserve of the 20th century, which overshot its purpose and crashed the sector at the time.

“I’m sure the government’s thinking deeply, because it can go wrong,” he said. “We need global partnerships and a full value chain. Stockpiling minerals that still need to go to China for processing isn’t the solution.”

Pilbara Minerals (ASX: PLS) managing director Dale Henderson welcomed the opportunity to participate in the consultation phase but stressed the importance of price support.

“Governments globally need to be more active, letting the normal competitive landscape play out hasn’t worked,” he said. “Price support equals stability, and stability is what allows the full supply chain to develop. Volatility has prevented that from happening so far.”

As consultations begin, the reserve’s final shape remains uncertain. But with geopolitical tensions rising and global supply chains under pressure, Canberra’s move has put the issue of resource security squarely in the spotlight.