Oceania | Economy | Oceania

Australia’s EU Critical Minerals Deal Is No Quick Fix for Its China Dependence

Europe can provide capital, technology and market access, but it cannot quickly replace China’s unmatched role as a buyer, processor and integrated industrial ecosystem.

The Australia-EU free-trade agreement, concluded in March 2026 after eight years of negotiation, has been widely hailed as a landmark step toward supply chain resilience in critical minerals. For Canberra, it promises tariff-free access to the European market for lithium, antimony, tungsten, and rare earths; deeper investment in downstream industries; and a formal upgrade to the 2024 Strategic Partnership on Sustainable Critical Minerals. For Brussels, it secures a stable, like-minded supplier of the raw materials essential to green manufacturing, defense technology, and the energy transition.

Viewed as part of the Western push to de-risk from concentrated supply chains, the pact is politically meaningful and economically worthwhile. But it is not a quick fix — and it certainly does not end Australia’s deep, structural dependence on China.

Europe wants to reduce over-reliance on single suppliers; Australia wants to broaden its customer base, attract processing investment, and move beyond simply digging and shipping ore. Resources Minister Madeleine King has highlighted Australia’s ambition: 49 mining projects and 29 midstream processing ventures seeking investment, with critical minerals export earnings projected to reach A$18 billion in 2026-27. This is welcome proof that Canberra has moved beyond symbolic communiqués to tangible industrial ambition. Yet China built its dominant position over 40 years of deliberate industrial policy, scale investment and ecosystem building. As King rightly pointed out, Australia is attempting to compress that transformation into a much shorter political timeline — a mismatch that the EU pact alone cannot resolve.

The deal also reflects a wider shift in the global economy. China’s structural concentration was built in an era when governments treated interdependence as stabilizing and efficiency as the organizing principle. The shocks of the COVID-19 pandemic, the war in Ukraine, and Chinese export controls exposed the downside of that concentration. Supply chains that once looked efficient began to look strategically brittle.

For nearly a decade since the first Trump’s administration, diversification has meant spreading risk across an increasingly fragmented world order. Political alignment is now more important than market efficiency.

However, in this joint effort, the most stubborn barrier is not geology, but industrial ecosystem. Australia has abundant critical minerals reserves, but China dominates the indispensable middle of the supply chain: refining, chemical conversion, separation, and advanced manufacturing. The data is stark. China absorbed 97 percent of Australia’s spodumene (lithium) exports. In rare earths, the International Energy Agency estimates China controls roughly 70 percent of mining, 90 percent of rare earth separation and refining, and 93 percent of permanent magnet production. For antimony, China holds more than 75 percent of global refining capacity. Tungsten tells the same story: China produces more than 80 percent of global output and hosts four of the world’s five large-scale refineries. Australia may be rich in ores, but it lacks the domestic processing capacity to turn them into intermediate products. As a result, it remains locked into sending raw concentrate abroad – overwhelmingly to China.

Complicating this further is the by-product nature of many critical minerals. Gallium comes from aluminum refining, germanium from zinc processing, tellurium........

© The Diplomat