By Melanie Burton
MELBOURNE (Reuters) -Australia said on Tuesday that it will provide A$135 million ($87.4 million) in financial support for two smelters owned by Trafigura unit Nyrstar, as part of its strategy to become a key supplier of critical minerals to Western allies.
The funding, announced by federal and state governments and supported by investment by Nyrstar, comes amid growing worries about supply chain vulnerabilities tied to China that have ramped up pressure on Western nations to secure access to critical minerals vital for the energy transition and defence.
Australia aims to position itself as a main player in this shift, but its metals processing sector is under strain from high energy and labour costs, while oversupply from top producer China continues to depress prices.
Earlier this year, Nyrstar put its troubled Port Pirie lead smelter in South Australia and Hobart zinc processing operations in Tasmania under strategic review, citing high energy prices and lower processing fees.
The support package will now allow Nyrstar to maintain operations while it explores modernisation of both facilities and accelerates studies to produce critical minerals – germanium and indium in Hobart and antimony and bismuth in Port Pirie.
The initial focus will be on fast-tracking an antimony pilot plant in Port Pirie, Nyrstar said. It first told Reuters in May that it was considering production of the metal used in ammunition and lead-acid batteries at the site.
But modernising Australia’s ageing smelters will require significantly more capital, potentially testing the government’s, and taxpayers’, resolve.
China, which dominates global processing of many critical minerals, has over the past year imposed restrictions on antimony and rare earths exports, disrupting supply chains for industries including automotive and defence and underscoring the geopolitical risks of over-reliance on Chinese refining.
Bolstering an alternative supply chain has become a top priority for Western governments and for the Trump Administration.
South Australia Premier Peter Malinauskas warned that without Western intervention, China could hold all the world’s smelting capacity. “That’s an unacceptable risk, particularly in the current geostrategic environment,” he told broadcaster ABC.
Australia’s minister for industry and innovation, Tim Ayres, told the ABC that he expected Port Pirie would be capable of producing 15,000 metric tons of antimony metal.
Antimony is an alloy hardener for other metals in ammunition and batteries and is critical for the manufacturing of semi-conductors found in electronics and defence applications. It is also used in flame retardant materials.
Meanwhile, the bailout of Nyrstar may trigger a flurry of aid-seeking calls to government officials from other struggling processing companies.
Last week IGO said it was assessing the future of its loss-making lithium hydroxide plant on the outskirts of Perth, run by joint venture partner Tianqi Lithium.
Glencore has asked for government assistance to support its Mount Isa copper smelter in Queensland state, while Rio Tinto has repeatedly flagged a tough outlook for its Tomago aluminium smelter in New South Wales, the state’s biggest energy user, given costly power.
BHP already pulled the trigger on its Western Australian nickel operations, putting them on ice a year ago.
($1 = 1.5451 Australian dollars)
(Reporting by Melanie Burton in Melbourne and Christine Chen in Sydney; Editing by Tom Hogue, Stephen Coates and Himani Sarkar)
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