Changing geopolitical dynamics are causing dramatic shifts in the supply and demand of minerals both on the world stage and in Australia according to a new report from KPMG Australia, Geopolitics and the Australian minerals industry. A key argument is that geopolitics affects supply and demand, and at the same time, as supply and demand drivers for minerals rapidly change and evolve, they have the very real potential to fundamentally redraw geopolitical power maps.
“Global geopolitical volatility presents risks but for those on the front-foot, it also presents significant opportunities. This is very important in the critical minerals and mining sector in Australia,” said Dr Merriden Varrall, Geopolitics Lead, KPMG Australia. “Keys to Australian industry success are increasing resilience and a company’s preparedness to effectively navigate geopolitical risk.”
On this theme, the KPMG report calls out four major geopolitical trends which it argues will drive risk in the Australian minerals sector in the global transition towards net zero carbon in 2030:
- Structural shifts to the international system
- Domestic discontent
- Industrial revolution
- The climate crisis
Nick Harridge, National Mining Leader at KPMG Australia said that businesses in the Australian minerals sector needed to ensure they understood these profound and ongoing changes and, more importantly, were prepared for them.
“We recognise that the minerals sector is critical for Australia’s economic wellbeing through employment and other contributions to communities, shareholders and government. Importantly, key components for infrastructure, renewables and batteries important for a decarbonising world are drawn from minerals and rare earth commodities. Rapid technological advances and community expectations for decarbonisation are driving increasing demand for renewables, and, at the same time, an increasingly unstable geopolitical environment is impacting the Australian minerals sector,” Mr Harridge said.
Other key findings of the KMG report include:
- Fossil fuels demand decreasing - albeit unevenly.
- Critical minerals demand increasing –(such as cobalt and lithium) and Rare Earth Elements.
- Reputation matters - consumer and shareholder focus on ESG and the social license to operate is growing.
- Security of supply from trusted partners is of increasing importance.
Australia – Key Producer of Mineral Commodities
Australia has extensive resources of many mineral commodities, some of which are considered critical for modern and emerging technologies, and by trading partners. The KPMG report notes that Australia is amongst the world’s top six producers of bauxite, coal, copper, gold, iron ore and industrial minerals.
Mr Harridge pointed to the fact that, compared to other countries, Australia has significant critical mineral resources and potential to be a leading supplier of commodities needed for renewables and batteries.
Australia Number One
- in world resources of rutile (titanium), zircon (zirconium) and tantalum
- world’s top producer of lithium, rutile and the second largest producer of zircon and rare earth elements.
Australia Top Five
- in world resources of critical minerals like antimony, cobalt, lithium, manganese ore, niobium, tungsten and vanadium
“Given its critical mineral leadership positions, geopolitical shifts are of vital importance to the Australian minerals sector,” Mr Harridge said. “Opportunities exist to improve the minerals sector’s preparedness for geopolitical disruption.”
Dr Varrall added that it was critical mining companies ensured they were responsive to geopolitical change and proactively pursued growth opportunities by following strategic steps. “We say that for miners, it’s vital to analyse your entire value chain, including impacts to your suppliers and critical stakeholders – gaining a holistic and deep understanding of which parts of your business are most exposed and where you should focus response effort. The geopolitical lens must be a constant to ensure ongoing responsiveness and positive productivity outcomes.”
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