Highlights

• Australia plans to sell stakes in a Critical Minerals Strategic Reserve to allied nations.
• The aim is to reduce China's control over rare earth supply chains.
• The A$1.2 billion reserve will provide partner countries with priority access to critical minerals.
• The exchange for this access includes joint funding and guaranteed demand from partner countries.
• This is a strategic initiative representing a bold market intervention.
• The goal is to create a more resilient and collaborative international supply chain for critical minerals.

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Australia is taking an unprecedented step to reshape the rare earth supply chain: it plans to sell stakes in a new Critical Minerals Strategic Reserve (opens in a new tab) to allied nations. This initiative, as reported by Reuters – essentially inviting partners like the UK, US, and France to co-invest in Australia’s stockpile of critical minerals – comes as Western governments scramble to end reliance on China for rare earth elements (REEs) and other “minor” but vital metals. Rare Earth Exchanges (REEx) has investigated this bold gambit, which could mark a turning point in how the world secures these strategic resources.

Australia’s Critical Minerals Reserve – A New Supply Pact

Australia’s federal government has allocated A$1.2 billion (≈$793 million) to establish a Critical Minerals Strategic Reserve, expected to be operational by the second half of 2026. Under this plan, foreign allies could buy shares in the reserve by providing cash investment and agreeing to offtake certain amounts of minerals. In return, an investing country would be entitled to a percentage of the stockpiled materials commensurate with its share. In essence, Australia is offering partner nations priority access to critical minerals – especially rare earth elements – in exchange for jointly funding the reserve and guaranteeing demand.

This initiative was quietly floated at a G7 meeting (opens in a new tab) on critical raw materials in September, and Australia has since engaged in more detailed talks with Britain. Notably, the UK’s export credit agency has earmarked £5 billion for projects in Australia and is being “consulted on the design and implementation” of the strategic reserve. Other interested allies reportedly include the United States and France. (France was set to send a delegation to discuss rare earth supply before its domestic politics delayed the visit.) Prime Minister Anthony Albanese’s government portrays the reserve as a way to leverage Australia’s mineral abundance for mutual security: “Australia has everything that is in demand, almost the entire periodic table,” Albanese quipped, referencing resources from lithium to vanadium. By involving allies, Australia seeks to become a “key player in global mineral markets” without “giving anything away” for free – partners will pay in, and Australia still expects a return on these strategic sales.

Breaking China’s Grip: Strategic Motivations

Why undertake such a novel partnership? The driving motivation is clearly to reduce China’s dominance over critical mineral supply chains, with rare earth elements front and center. China today still controls over 85% of global rare earth processing capacity and an even tighter hold on heavy rare earth refining. It has leveraged this dominance both economically and geopolitically. Western nations learned the risks the hard way: earlier this year, Beijing imposed new licensing requirements on rare earth exports and magnets, crippling supply chains for U.S. and European automakers for several months. This followed China’s export curbs on germanium and gallium in retaliation for U.S. chip sanctions, and harkened back to the 2010 rare earth embargo that jolted Japan. In short, China has not hesitated to weaponize its grip on critical minerals.

Australia’s offer to allies is a strategic counter-move. By stockpiling critical minerals at home and sharing access with partners, Australia aims to provide a collective buffer against Chinese supply squeezes or price manipulation. Albanese himself framed the reserve as a tool to “stop manipulation, particularly by state enterprises,” a thinly veiled reference to Chinese state-backed firms. There is precedent for concern: Chinese entities have flooded markets (for example, oversupplying nickel via Indonesia) to drive down prices and bankrupt competitors. In the rare earth sector, years of artificially low Chinese prices have deterred new entrants and even caused past Western producers to fail. Australia and its allies want to break this cycle of dependence and vulnerability.

National security is also at stake. Rare earths like neodymium, dysprosium, and others are irreplaceable in fighter jet engines, precision munitions, satellites, and other defense technologies. A secure allied supply is thus vital for defense readiness. Britain, for instance, recognizes it “lacks… rare earths critical for defence,” unlike resource-rich Australia. By investing in Australia’s reserve, countries like the UK hope to secure defense-grade materials for their industries. As one UK official put it, “securing our supply of critical minerals is vital for our industrial strategy” – a sentiment broadly shared across Western capitals. In inviting allies to co-invest, Australia is effectively forging a strategic raw materials alliance to blunt China’s leverage.

Market Impacts: Stabilizing Supply and Prices

Australia’s plan could reshape rare earth markets by pairing free-market trade with a state backstop—a hybrid in which a national reserve aggregates buys and acts as buyer of last resort. In theory, that lowers financing risk for new projects and dampens boom-bust cycles long distorted by China’s dominance. Resources Minister Madeleine King argues the market is already malfunctioning; a well-designed reserve could buy when prices are depressed (supporting producers) and release stock into spikes (shielding consumers), smoothing volatility rather than distorting it.

For investors, the draw is certainty. Government-backed offtake can neutralize the “China price” risk that scares lenders, making marginal projects bankable. The U.S. Department of Defense (DoD) just showed the playbook with MP Materials—setting a price floor roughly twice China’s prevailing level and taking equity, a move markets hailed as a game changer. Australia’s reserve could serve a similar function while aiming to sell to partners at a profit. Industry reaction is cautiously optimistic: Lynas’ Amanda Lacaze warns against undercutting domestic producers, while Wyloo’s Luca Giacovazzi (opens in a new tab) sees leverage in country-to-country deals and demand aggregation; Australian Strategic Materials says aggregation could de-risk new mines and refineries. The hinge is execution: a joint government–industry task force is now drafting pricing, storage, and release rules to support—rather than smother—private producers.

Allies’ Playbook: U.S. and Japan’s Parallel Efforts

Across the allied bloc, governments are turning to strategic stockpiles and co-investment to secure rare earths and other critical minerals. In the U.S., the DoD and Congress are rebuilding a domestic REE chain via the Defense Production Act, magnet-manufacturing support, and a refilled National Defense Stockpile that can sign long-term purchase contracts—including with allied projects—and begin holding key alloys and magnets for the defense base.

Of course, the DoD made a major investment in the mine-to-magnet initiative with MP Materials, as well as other deals.

Japan offers the template: after the 2010 cutoff, it deployed JOGMEC’s national rare-metals stockpile (able to release reserves during disruptions), co-financed Lynas with Sojitz to stand up separation capacity in Malaysia, and invested in recycling and even seabed exploration—steps widely seen as a model of coordinated state–industry action. Europe is following with pooled funding—France, Germany, and Italy have launched a €2.5 billion program, including a €500 million French minerals fund—while Canada and others advance their own strategies. The common thread: democracies aligning to de-risk supply through stockpiles, long-term offtakes, and joint supply-chain build-outs.

Outlook: A New Allied Rare Earth Coalition?

Australia’s proposal to sell reserve shares to friendly nations could be a cornerstone in an emerging “allied critical minerals coalition.” By jointly investing in a buffer stock of rare earths and other critical minerals, these countries aim to thwart coercive control of supply and ensure each other’s high-tech industries are never at China’s mercy. If the plan succeeds, it may foster greater trust and interdependence among participants – much as energy alliances did in the past – but in the realm of strategic metals. For the rare earth industry, this could mean a more sustainable growth environment: prices kept within a reasonable band, new mines and magnet factories finding support, and a gradual erosion of China’s de facto monopoly.

That said, challenges abound. Coordinating across borders on what to stockpile, when to release it, and how to price materials will require deft diplomacy. Australia’s leadership will be tested in balancing national interests (getting “maximum return” for its resources) with allied solidarity. There is also the question of implementation speed – 2026 is not far off, and critical minerals demand is surging every year. Moreover, China is unlikely to sit idle: it may adjust policies or prices to undercut these efforts, as it has in the past. In other words, the rare earths saga is entering a new phase of strategic one-upmanship.

For now, Australia’s rare earth gambit has been met with enthusiasm from allies and cautious hope from industry. It represents one of the boldest market interventions yet in the critical minerals sector, driven by the realities of 21st-century great power competition. Rare Earth Exchanges will continue to monitor how this reserve materializes. Will it usher in a more resilient, collaborative supply chain for rare earth elements, insulating us from future shocks? If Australia and its partners have their way, the answer may well be “yes” – a welcome development for all who rely on these small but mighty elements that power our modern world.

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