Extreme derisking of Australian rare earth projects: The geopolitical imperatives reshaping global production networks

Rare earth metals are the most critical of ‘critical minerals.’ This is because of the high concentration of their extraction and production in China and their centrality to both defence and renewable energy transitions. In Australia, A$8.6bn in public money has been committed to rare earth mining and processing projects – in the context of an industry worth US$4bn per annum, globally. In contrast, A$1.72bn of public funding has been committed to the far larger lithium industry. To explain these relatively high levels of public support for rare earths, this paper develops a geopolitically sensitive approach to the initiation of global production networks (GPNs) by state actors deploying derisking strategies. Analysis is based on a curated database of Australian critical mineral mines and processing facilities and an examination of government funding for rare earth and lithium projects. The comparison between rare earths and lithium demonstrates how extensive the financial derisking of rare earths has become. However, even under what we characterise as extreme levels of derisking, state planners are still organising the industry within the logic of GPNs. They work in coordination with counterparts in allied governments, and nascent (Western) extraction, processing and component manufacturing companies, as well as OEMs. We thus contribute to growing understandings of the role of state actors, motivated by geopolitical concerns, in initiating GPNs within the global energy transition. At the same, we show how derisking strategies are heavily tailored to the specifics of commodities based on their global industrial dynamics.