Spotlight on Australia - November 2025

China has cornered the critical mineral market. This has sent the US, Europe, and Australia scrambling to secure critical mineral supply and refining. Australia has committed AUD 1.2 billion for a critical minerals strategic reserve and AUD 7 billion for tax offsets for processing critical minerals. However, many countries are also feeling pressure with more traditional metals such as aluminium, zinc, and steel. Chinese market power is affecting them too, but are rising energy costs. In Australia, key traditional smelters have recently turned to government for help. Can the government afford for them to fail?

Rising pressure and commitment

The blast furnace at the Whyalla steelworks was seldom out of the news in 2024. Botched routine maintenance in March 2024 led to the furnace being out of action for nearly four months. Molten steel was allowed to go cold, blocking up the furnace. It turned out to be a prescient symbol for the Australian metal manufacturing industry.  

In August 2024, the Whyalla furnace was shut down for another four months because it ran out of coking coal. Meanwhile, job losses and reports of unpaid bills plagued the British owners. In February 2025, the steelworks went into administration. The state and federal governments then stepped in with an AUD2.4 billion rescue package and will provide money to help Whyalla develop green iron.

This was the start of a rising government commitment to meet the rising pressures in the Australian smelting industry.    

"There's no industry that is more important for our nation than steelmaking, and here in Whyalla 75 per cent of Australia's structural steel is made," Anthony Albanese, prime minister of Australia.

 In March 2025, Nyrstar, the owner of a lead smelter in Port Pirie and a zinc smelter in Hobart, announced that its smelters were “uneconomical” and were under review. They also announced what many had already known, that their 2021 plan to build a green hydrogen facility at Port Pirie had been abandoned.

"Smelting is and should be considered critical infrastructure.” Nyrstar Australian spokesperson.

In August, the federal and SouthAustralian governments stepped in with AUD 135 million for the Nyrstar smelters. The money will keep the smelters going and will explore smelting opportunities with critical minerals: antimony, bismuth, germanium and indium.

In October, the federal and Queensland governments announced an AUD 600 million package for Glencore’s copper smelter in Mount Isa. Glencore had planned to close the smelter, given its nearby copper mines are almost exhausted. But the smelter is only one of two in Australia, with over 1,300 kilometres between them.

October also saw Rio Tinto threaten to close its aluminum smelter in Tomago by 2028. The smelter produces around 37% of Australia’s aluminum and is New South Wales' largest electricity customer. 2028 is when its current electricity supply contract expires, and Rio Tinto doubts it can secure a new contract at a sustainable price. However, in November, the federal and New South Wales governments promised to secure cheaper energy for the smelter by helping the Snowy Hydro Company to expand its renewable energy or to alternatively buy electricity on the smelter’s behalf. 

"I am determined to exhaust every opportunity to secure the future of that site for the Hunter Valley, for the New South Wales economy, … and for Australia’s economy” Tim Ayres, minister for industry.

In the national interest

When Australia removed much of its industry protection in the 1980s, companies felt the competitive shock of the global market. It was tough medicine.

40 years later, Australia’s smelting companies are feeling a shock from the global market again. But this time the cause is external and the end result, if left to ripen and spoil, will be a net negative to Australia. Particularly if Australia wants to realise its dream of becoming a green metals powerhouse. Australia must build on its manufacturing base, not lose it to circumstance. So government has stepped in to help. 

“Smelting is one area where we can value-add to a mineral resource using energy that should be cheaper and greener than the rest of the world. And once you have lost that capacity, it’s very hard to get back,” Alison Reeve, Grattan Institute.

The China effect

Industry policy never went out of vogue in China. China’s five-year plans have been in motion since before President Xi Jinping was born.

China’s command of critical minerals and cutting-edge technology for solar and wind power is well known, but its domination of traditional metals is less celebrated.

Through decades of direct and indirect subsidies, China now produces around 57% of the world's refined copper, 60% of its aluminium, 53% of zinc, 42% of lead, and 25% of Nickel. It also controls around 75% of nickel refining output in Indonesia, which is the top refining country at 45%.

The chart below shows the rapid increase in Chinese copper ore imports and refined copper production.

The surge in Chinese capacity has helped push down prices through economies of scale and excess supply. Chinese smelters are also more modern and efficient than their older competitors in countries like Australia. For example, Chinese smelters are at the lower end of the cost curve for global copper in the chart below.

“It is patently clear that Western private companies cannot produce refined metals at prices competitive with those made by Chinese producers.” Clyde Russell, Reuters, Asia commodities and energy columnist.

“The aluminium industry is no longer competing against foreign companies but against foreign governments writing the rules to their own advantage,” Marghanita Johnson, CEO, Australian Aluminium Council.

Besides the impact on prices, Chinese production has pushed up demand and the price for the industry’s raw inputs. Demand has been so strong this year that the central government has stepped in with “involution” to tame the price of ores.

The strong demand is also evident in the price Chinese smelters charge to refine ores; in the case of copper, this has gone negative, with Chinese smelters now paying to refine copper concentrate.

Source: Financial Times

For Australian and global producers, higher ore prices are further squeezing their margins.

"Port Pirie requires mineral concentrate to produce lead, and its operation in Hobart needs concentrate to produce zinc. This is procured within Australia from Australian mining operations, however China has been strategically procuring concentrate from these Australian operations on long-term contracts at a premium, which has made it very difficult for the likes of Nyrstar to obtain … feedstock, or the concentrate, at a price that makes their manufacturing competitive." Rebecca Knol, CEO, South Australia Chamber of Mines and Energy.

The Russia effect

As the Yom-Kippur War led to the OPEC oil shocks in the 1970s, Russia’s invasion of Ukraine has jacked up gas and energy costs around the world.

But how can this be true for Australia, the second-largest LNG exporter in the world and abundant in coal?

As Australia has transitioned away from coal to gas-fired power stations for base-load power, the export price for LNG has become a key driver of wholesale electricity prices in Australia. So when Russia invaded Ukraine and global LNG prices increased, so did Australia’s electricity prices (see chart below).

In 2024-25, gas-fired power stations had an average wholesale spot price of $200 per MWh, well above the average wholesale price of $131 per MWh.

As has been the case for Germany and several other countries, these higher electricity prices have hurt Australian industry.

But for manufacturing, the increase in the gas price has been a double hit as many manufacturing industries also use gas for high-temperature processing. This includes the ammonia, and most importantly for us, the alumina industry (turning bauxite into alumina) (see chart below).

Source: Marketforce (2025) “Australia’s Gas Guzzlers”

Overall, the Australian Industry Group found that increasing gas prices has been the largest contributor to higher prices for Australian industry since the pandemic (see chart below).

Source: Australian Industry Group

The impact of net-zero

In November, the federal opposition decided to abandon their commitment to net-zero emissions by 2050 and as they did so, they launched a scathing attack on the government, blaming its net zero policies for higher costs for consumers and business.

 “Our emissions reduction goals will never come at the expense of Australian families ..” Susan Ley, federal opposition leader.

The truth is that Australia’s ageing coal-fired power plants are becoming increasingly expensive to maintain.  Three coal power plants estimated needed refurbishment costs of between $400 million to $1.3 billion. Two decided not to proceed, and the third closed down.

Further, solar power is now cheaper than coal power and Australia is building more and more solar power (see chart below).

Source:Department of Climate Change, Energy, the Environment and Water (2025) “Australian Energy Update 2025”

Recent studies have proved that Australia’s renewable energy growth is correlated with lower electricity prices.

For Australia’s smelters, more solar power cannot come soon enough. The CEO of the Tomago aluminium smelter even said this directly. Further, the federal and NSW governments are looking to increase renewable energy as part of its plans to help the Tomago smelter.

“What we are facing is … a huge bridge to get over between the end of our current contract at the end of 2028 and when a viable renewable energy alternative comes online,” Jerome Dozol, CEO, Tomago Aluminium.

Final thoughts

Industry policy is justified when markets fail. Here, Australian governments are stepping in to safeguard not only Australia's existing smelting capacity but to ensure the potential for Australia to become a green metals and critical minerals powerhouse. Australia cannot afford to lose its smelting expertise and value chains.

As Australia continues to increase its renewable energy supply and invests in its green metals future, the current difficulties will fade against the backdrop of a new era in Australian smelting.

"Get the model right and it can be applied to steel, hydrogen, ammonia, cement, fertiliser, and even data centres — anywhere long-term clean power is the foundation of competitiveness." Oliver Yates, CEO, Clean Energy Finance Corporation.