Critical mineral supply chains: the role for Vietnam, Australia and the US
Dr Dan Linh Nguyen ,
Hanoi University of Science and Technology
The global energy transition, including the shift to renewable technology, electric cars and energy storage systems, will rely on the availability of critical mineral supplies. However critical mineral supply chains are not very diverse – most of the processing occurs in just one country, China. As a result, many countries are seeking to diversify mineral supplies, including the United States through policy interventions like the Inflation Reduction Act (2022), and Australia through its Critical Minerals Strategy 2023-2030 (2023).
What role will Australia and the US play in global critical mineral supply chains, and where does Vietnam fit into the picture?
The US-Australia alliance and critical minerals
Australia is currently a leading supplier of the critical minerals needed for net zero goals. In 2022 it produced 27 critical minerals, 15 of which ranked in the top five for global supply. Australia ranked number one in the world for economic resources of nickel, widely used in lithium-ion batteries to improve the energy durability and charging capabilities. It is also the world’s largest producer of lithium (47 per cent), although all of its lithium goes to China for processing.
After the supply chain disruptions caused by COVID, the US is concerned about its reliance on imported critical minerals, batteries, electric vehicles (EVs) and other renewable technology. It is also worried about the security of connected vehicles and what happens to their data.
So the US is trying to grow its role in battery manufacture, using instruments like the Inflation Reduction Act (2022). This Act, amongst other things, promotes the domestic component of EV battery manufacturing. For example, EV manufacturers in the US get a tax credit (about $3,750) if 60 to100 per cent of the value of battery components are produced or assembled in North America. As a result, automakers are increasingly investing in domestic battery production.
As security partners with defense and trade ties, Australia and the United States established the Taskforce on Critical Minerals (2023) to support the renewable manufacturing sectors and meet the climate targets of both countries. This taskforce tries to match supply and demand between Australia and the United States by looking at what U.S. manufacturers need and will demand in the future, and then identifying what critical minerals Australia has and can feed into to diversify the supply chain.
The Export-Import Bank of the United States (EXIM) recently announced plans to support projects in areas of high interest for both governments, including critical minerals, climate-friendly technology, and regional infrastructure. Through working groups, joint initiatives, and periodic meetings, Australia and the United States will discuss progress, share best practices, and identify areas for further collaboration to enhance the resilience, competitiveness, and sustainability of their critical mineral industries.
Vietnam’s role in the energy transition
Despite being a small country in Southeast Asia with insignificant carbon emissions, Vietnam has made a bold climate pledge to reach net zero emissions by 2050.
Vietnam’s demand for critical minerals is forecast to rise as rapidly as its economic growth – at a rate of about 6 per cent annually.
So in 2023, the Vietnamese government issued its Geological, mineral, and mining industry Development Strategy until 2030, with a vision to 2045. The strategy aims to complete a comprehensive geological survey, and to evaluate natural minerals potential to contribute to socio-economic development, resource conservation, defense, security, and disaster prevention.
Vietnam already has known, abundant critical minerals availability. It already ranks second in the world for rare earth reserves ( about 22 million tons, or 19 percent of the world’s known reserves), just after China.
Recently, a number of countries, including South Korea, Australia, and Canada have come to Vietnam to look for new sources of critical minerals. The US and Vietnam have signed an agreement, which includes a technical cooperation plan, to help quantify Vietnam’s supply of important minerals, especially rare earths.
Supply is only one part of the question. Minerals processing and enrichment are also important in meeting the needs of importers like the US. If Vietnam wants to exploit and export rare earths as well as other critical minerals sustainably, it will need to secure deals with the off-takers. This can be done by collaborating further with countries that have high demand for these minerals, such as the US.
With the global race on to get to net zero, the time is right for Vietnam to play a role in mining and processing the critical minerals desperately needed for the energy transition.
Dr Ngyuen is a participant in the Perth USAsia Centre’s Program: Next Generation Regional Perspectives on the US-Australia Alliance in the Indo-Pacific.