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Beijing’s Response to the U.S.-Australia Agreement

China on Tuesday reacted to the recently signed U.S.-Australia critical minerals agreement, emphasizing that countries rich in rare earth resources should play a proactive role in maintaining supply chain security and stability.

A spokesperson for China’s Ministry of Foreign Affairs, Guo Jiakun, said the formation of global production and supply chains is shaped by market dynamics and corporate decisions, but stressed that nations with abundant critical minerals must ensure “normal economic and trade cooperation.”

The comments come shortly after U.S. President Donald Trump and Australian Prime Minister Anthony Albanese inked an $8.5 billion framework deal aimed at boosting the supply of rare earths and other strategic minerals outside of China’s dominance.

China’s Export Controls

The announcement follows China’s move earlier this month to tighten export controls on rare earths and related technologies, citing concerns about potential misuse in military and sensitive sectors. These measures have sparked concern among Western automotive and electronics industries, which rely heavily on rare earths for production of electric vehicles, semiconductors, and renewable energy technologies.

China currently dominates the global rare earth market, producing roughly 60% of the world’s supply, making its policies a focal point for international strategic planning.

Global Demand for Rare Earths

The demand for rare earths and other critical minerals is projected to soar in the coming decade as the clean energy transition accelerates. Wind turbines, electric vehicle batteries, solar panels, and advanced electronics all require significant quantities of these minerals, intensifying competition and strategic maneuvering among major economies.

George Cheveley, natural resources portfolio manager at Ninety One, described the U.S.-Australia agreement as a long-awaited but strategic move to bolster supply chains outside of China. He noted, however, that investing in the sector remains complex due to political influence and government subsidies that distort market economics.

Market Reaction

Following the announcement, shares of key Australian rare earths and critical minerals companies experienced mixed movements:

• Lynas Rare Earths, Australia’s largest rare earth producer by market cap, initially rallied but ultimately fell 7.6%.
• Pilbara Minerals, a lithium producer, gained around 2.6%.
• Latrobe Magnesium, Australia’s primary magnesium producer, surged 15%.
• Iluka Resources, a mineral sands miner, slipped 0.1%.

In the U.S., rare earth stocks saw modest declines in premarket trading: Critical Metals -3.8%, USA Rare Earth -5%, MP Materials -1.9%.

Strategic Implications

Analysts say the deal highlights the growing urgency for diversified supply chains outside of China. As global demand for critical minerals grows, partnerships like the U.S.-Australia agreement may serve as a blueprint for other nations seeking to secure long-term access to essential resources.

George Cheveley emphasized that while the agreement is a positive development, the sector remains small and politically complex, requiring careful consideration for investors looking to enter the market.