Strategies for Securing Critical Material Value Chains

Strategies for Securing Critical Material Value Chains
By Dr Jeffrey Wilson on 14 May 2020

Indo-Pacific | Energy and Resources

The value chains for critical materials – such as rare earths, cobalt and lithium – are very insecure.
International monopolies, trade restrictions and state-owned enterprises distort markets and undermine supply security. cover-sninp.PNG
The US-China trade dispute has highlighted the need to develop new, secure and competitive value chains.
This will require bringing new suppliers into a market which is currently characterised by monopoly and a lack of competition.
Critical materials are geologically abundant.
But high levels of risk inhibit private sector investment.
Technological, social, market and political risks beset the critical materials industry. As a result, few companies have entered the market in recent years, despite expectations of soaring demand.
Australia, Japan, the US and the EU have emerged as the reform coalition for improving critical materials markets.
In recent years, each government has announced policies to improve supply security, and they have collaborated to promote reform in international fora.
However, their reform efforts have yet to address the underlying risks that inhibit investment.
The next step for reform efforts is to adopt policies which will help de-risk investment by new market entrants.
There is a pressing need for reform-minded governments to augment their efforts to improve security in critical material value chains.
This should involve deploying financial support mechanisms to help de-risk private sector investment, and strengthen the international cooperation required for cross-border value chains.