Australia is considering establishing a price floor for critical minerals such as rare earths, to help shore up supply of commodities essential to defense and strategic technologies, said Resources Minister Madeleine King.
The U.S. recently surprised commodity markets by guaranteeing a price floor for rare-earth minerals produced by American supplier MP Materials, helping to protect that company from swings in prices. Analysts and traders speculated that other Western governments might follow suit, as the U.S. and its allies seek to undercut China’s dominance in refining many key minerals.
Despite growing concerns about China’s chokehold on supply, low prices for critical minerals have hindered new investment in processing facilities across the West.
“Pricing certainty means companies and investors are less exposed to volatile markets and prices, which are opaque and prone to manipulation,” King said in remarks emailed Tuesday.
Australia’s government earlier this year flagged plans for a strategic reserve of critical minerals. Officials are actively exploring mechanisms for an appropriate price floor and are focused on creating so-called offtake, or supply, agreements, King said. Her remarks were earlier reported by the Australian newspaper late Monday.
In addition to critical minerals needed for defense and strategic purposes, Australia will explore agreements in minerals where the country is able to help bridge gaps in global supply chains, King said. It hopes that by providing price certainty for emerging critical minerals projects, private companies will be more willing to invest, she said.
Shares in Australian critical minerals producers surged Tuesday. Lynas Rare Earths, the biggest supplier of rare earths outside of China, rose by 5.2%. Iluka Resources, which is building a rare-earths refinery in Western Australia, jumped 8.7%.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
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