Madeleine King says it is ‘terribly difficult’ to intervene to save every ageing smelter and refinery

The Albanese government faces tough calls on sovereign capability and the future of Made in Australia, as China ramps up minerals processing.

Resources Minister Madeleine King. Picture: Martin Ollman

Resources Minister Madeleine King has made pointed references to China in saying the Albanese government can’t necessarily intervene to save every failing minerals smelter and refinery in Australia, despite its desire to retain sovereign capability.

Ms King and the government are still smarting from last year’s collapse of BHP’s nickel business in her home state of Western Australia, which saw the mining giant mothball mines and an associated smelter and refinery.

Glencore has warned its copper smelter and refinery in Queensland are now on the brink and that multiple other smelters and refineries across Australia are “clearly at breaking point” in a blow to the government’s ambitions for Made in Australia and critical minerals.

The government is under pressure to fund bailout and relief packages that could total more than $10bn if multiple companies were to receive the kind of support they were seeking.

It is understood the government is worried about being stuck with huge rehabilitation liabilities should it become too heavily involved in the running of ageing assets. 

“It’s terribly difficult because a lot of these capabilities were built in a different time for different reasons,” Ms King said. “To turn to the one I know best, the Nickel West (BHP) example, involved a smelter and a refinery made for nickel to go into stainless steel, not necessarily for batteries.

“A lot of money has been spent by BHP retro-fitting that facility (the refinery). In the meantime, because of an opaque market and a combination of Chinese investment of gargantuan proportion into Indonesia nickel mines … there was a steep decline in nickel prices which led to the closure of Nickel West.”

Ms King compared the BHP situation in nickel to the plight of Glencore in copper processing and that of other operators of smelters and refineries built decades ago.

“I’m not expert enough to know if there’s a replacement for these assets but they do become a matter of sovereign capability. We know they are important,” she said. “The government can’t necessarily intervene in every single moment where these facilities run into problems because of international markets.”

The Glencore operations at Mt Isa and Townsville have been hit by China rapidly boosting its copper processing capacity. The excess in global smelting capacity has led to treatment and refining charges (what companies pay to have copper processed) falling to a 25-year low. The problems faced by the operators of smelters and refineries is not limited to very old assets. Lithium hydroxide refineries built by China’s Tianqi and New York-listed Albemarle in WA and commissioned since 2020 have also struggled.

The foreign ministers of the US, Australia, India and Japan took a swipe at China on Wednesday and announced they had launched the Quad Critical Minerals Initiative. In a joint statement from Washington, they said it was “an ambitious expansion of our partnership to strengthen economic security and collective resilience by collaborating to secure and diversify critical minerals supply chains”.

Ms King stopped just short of saying China was intentionally seeking to manipulate and stymie attempts to maintain and build integrated supply chains in Australia and elsewhere in the Western world.

“I don’t know if it’s intentional but if you are oversupplying the market, you’re changing the prices, and that’s what’s happened with nickel. It is what’s now happening with copper and lithium,” she said.

“China’s a different economy that can withstand different pressures than we can where we’re an open market economy.

“We’ve got a near dependence on exports and the export earnings to make most of our industries feasible.”

Ms King said the government had put its “money where its mouth is” on Made in Australia and critical minerals with the 10 per cent production tax credit on downstream process due to kick in from 2027, and its plans for a critical minerals strategic stockpile seen as a way to counter price manipulation.

Copper is not on Australia’s list of critical minerals, meaning the Glencore smelter and refinery would not qualify for production tax credits as it stands.

Other pools for money that may help save smelters and refineries are the $15bn National Reconstruction Fund and the $1.9bn Powering the Regions fund.

Originally published as Madeleine King says it is ‘terribly difficult’ to intervene to save every ageing smelter and refinery