US policy in play for WA miners

THE $US520 billion Inflation Reduction Act unveiled by US President Joe Biden in 2022 has been seen as a double-edged sword in Western Australia.

Designed to bring about a 40 per cent cut in that nation’s emissions by 2030, the IRA includes substantial grants, loans and subsidies for decarbonisation initiatives, domestic manufacturing, and downstream processing.

Its implications for other nations have been the subject of much debate.

Having more US processors demanding more sustainably sourced battery metals is undoubtedly good news for tier-one mining jurisdictions with free trade agreements in place, such as Australia and Canada.

On the flipside, concern has surfaced the Act would hamper Australia’s own downstream processing ambitions by offering better project economics to shift developments to the US.

A recent Chamber of Minerals and Energy of Western Australia report laid out both sides of the debate.

That report found the 10 per cent tax credit for advanced manufacturing production costs offered under the IRA would benefit Australia’s nickel mining industry but would undercut establishment of a domestic industry.

US Energy Resources assistant secretary Geoffrey Pyatt met with WA’s battery metals miners, processors, and researchers in March.

His nation’s efforts to build a clean supply chain were a hot topic.

“The theory of our case is that this accelerated investment, for instance in clean hydrogen, is going to allow a faster-than-expected scaling up of production lines,” Mr Pyatt said.

That would drive down the costs of these technologies, he said, as had happened already in electric vehicles.

“You have a lot of Australian companies that are looking at additional opportunities to strengthen their partnerships with the US to do more here in terms of value creation and exploration in Australia, and to unlock supply chains to drive the transition happening in the US,” Mr Pyatt said.

“It will also incentivise a lot of new investment, for instance on new battery chemistries, and unleash the private sector to do what the private sector does.”

He said Australia’s security and economic ties with the US, and what he described as an unambiguously positive association with US politics, positioned Australia well to benefit from the IRA.

“If you look at US investment in Australia’s critical minerals sector, we’ve seen $A2.3 billion of new private sector and government investments here, just since the IRA was passed,” Mr Pyatt said.

“We are your biggest investors … and that is going to remain the case.

“The fact that you are going to have Australian lithium, which is going to be processed at a Tesla factory in Texas, says a lot about how we are building up a secure and reliable global supply chain involving partners.

“The US fully supports Australia’s desire to develop some of that same value addition here in WA as well.”

IRA key measures ($US)

• $14bn to create non-profit agency to partner with private sector in financing clean technology projects.
• $7bn investment into solar access to low-income communities.
• $1bn in loans to finance largescale renewable energy projects.
• $3.6bn in loans for clean energy technology innovation.
• $2bn in grants for domestic production of EV and hydrogen vehicles.
• $500m in grants to grow biofuels sector.
• $5.8bn to support energy intensive operations in reducing emissions.

Mr Pyatt’s comments come as Australia’s politicians and resources sector look for ways to keep domestic battery metals miners afloat as commodity prices collapse.

The fall has hit WA’s nickel industry hardest.

A flood of Chinese-backed product from Indonesia has driven the price of nickel on the London Metal Exchange down from about $US30,000 per tonne in 2023 to as low as $US15,600/t last month.

Nickel recovered 15 per cent since early February to about $US18,000/t in mid-March, but Indonesia has signalled it would do what it could to stop that price rising further.

As of Thursday it sat at $US16,640/t on the LME.

“We need to find a way to deliver the vastly increased volumes and material that we need in order to meet our climate targets,” Mr Pyatt said.

“That means mobilising investment and it means introducing a greater level of transparency and predictability and pricing.”

While primarily a domestic policy, the IRA does play into a US objective to eat into China’s battery metals dominance.

The Biden administration wants to bar China, Russia, North Korea, and Iran – and companies elsewhere backed by those nations – from accessing IRA incentives.

“We don’t want to cede this ground to China, which is an adversary that has a very different view of how the world should be organised, whose companies behave less transparently, and a country that, over the long term, is trying to challenge the kind of rules-based international system we all have benefited from,” Mr Pyatt said.

The US effort in this space is headlined by the Mineral Security Partnership, a bloc of 15 nations representing more than half of global GDP committed to working together on critical minerals supply chains.

Mr Pyatt said the Western world could not allow China to dominate supply chains in the same way Russia had owned the European energy space.

“We will leave ourselves vulnerable to domination of the market by a single supplier who has already demonstrated a willingness to instrumentalise that market control,” he said.

“(China’s) willingness to use its market power to manipulate prices and manipulate competition … is something we all need to work together to counteract.”

The question of whether the US might need dirty nickel to fuel its aspirations looms as another problem.

Argentina’s newly elected climate change-denying president, Javier Milei, has signalled a desire to realign his country with the US after decades of Chinese investment.

And Indonesia has been rumoured to be seeking a trade deal with the US. My Pyatt was coy on whether such a deal was on the cards.

“The future is unpredictable,” he said.

“But what I’m telling you is right now the only FTA critical minerals agreements we are negotiating are with the EU and with the UK, and even those have taken a long time.”