The Albanese government’s announcement of a $1.2 billion critical minerals strategic stockpile marks an important step towards securing Australia’s economic future. Yet history warns us that simply building supply is insufficient: market volatility, fragmented value chains and regulatory hurdles can still derail even the most promising ventures. If policymakers and industry leaders are serious about delivering sovereign capability, they must build durable partnerships, plan for market instability and learn from past failures, such as the Pinjarra gallium refinery.

In the late 1980s, the Pinjarra Gallium Refinery in Western Australia represented one of the boldest critical minerals initiatives outside of China. Built by French chemical giant Rhone-Poulenc, the $50 million facility was designed to produce 50 tonnes of gallium per year—more than all non-Chinese production today. It promised to place Australia at the heart of the global gallium and rare earths value chain, just as the modern world’s appetite for advanced materials was accelerating.

Yet, within just a few years, Pinjarra’s promise collapsed. Delays due to environmental permits blocked plans for an integrated rare earths processing facility. Gallium prices crashed amid global oversupply and emerging Chinese competition. Australia’s lack of midstream and downstream refining capacity added crushing costs and complexity. In short, Pinjarra had the ambition—but not the resilience—to withstand the inevitable shocks from operating in niche, high-risk commodity markets.

There are profound lessons for today’s policymakers, especially amid the optimism surrounding strategic stockpiling.

First, building resilience requires more than announcements. It demands long-term, bipartisan policy support that gives investors and operators the confidence to survive temporary market downturns. Pinjarra’s environmental permit challenges delayed expansion, ultimately crippling the site’s economic viability. Today’s policymakers must ensure regulatory certainty and support across election cycles to nurture new critical mineral capabilities to maturity.

Second, small critical mineral markets are highly volatile and supply-side initiatives alone won’t stabilise them. When Pinjarra entered production, gallium prices dropped 20–30 percent almost overnight. The refinery couldn’t offset its costs with higher volumes or diversified products.

The strategic reserve proposed by the Albanese government offers a useful starting point—but it must be tied to longer-term offtake agreements, pricing frameworks and potentially shared public-private risk management mechanisms. Without predictable demand, even world-class production facilities will fail.

Third, we must build integrated, domestic value chains. We can’t just mine and ship raw materials.

Pinjarra’s gallium was shipped halfway around the world to France for purification, then to Canada for testing and finally to customers in Japan. That six-month supply chain was costly, slow and vulnerable. China’s dominance is built on mineral extraction and control over refining, manufacturing and technology. Australia must aim for vertically integrated production clusters, enabling fast, reliable, cost-effective processing and supply at scale.

Fourth, international collaboration must be strategic, not opportunistic. In Pinjarra’s era, Australia had abundant minerals but lacked refining technology, testing labs and global market influence.

Australia must strengthen partnerships with technologically advanced allies such as Japan, South Korea, the European Union and the United States to build real sovereign capability by bringing together resources, expertise and investment.

Finally, and perhaps most importantly, demand certainty matters just as much as supply.

The Pinjarra refinery struggled because no major industrial customer—defence, energy or technology—was willing or able to underwrite long-term demand. Today’s environment is more favourable: defence industries, electric vehicle manufacturers and renewable energy companies are all hungry for secure supply chains. However, the government must play a direct role in bridging the gap between producers and consumers, ensuring that the private sector is not left alone to weather inevitable market storms.

There are parallels here to what the US is attempting with its Defense Production Act and what the EU is doing under its Critical Raw Materials Act. Australia’s proposed strategic stockpile can play an important role. But it will do so only if paired with serious policy around downstream industry, long-term offtake and international partnership.

The risks of complacency are clear. Without integrated planning, we will build strategic reserves that sit idle. Without price and demand stability, critical minerals projects will collapse under the weight of market volatility. Without collaboration across the value chain, Australia risks remaining a raw materials supplier in a world where true economic security lies in advanced manufacturing and technology sovereignty.

The Pinjarra gallium refinery should stand as both a warning and a lesson. We can’t afford to repeat its mistakes.

The critical minerals opportunity will only be realised through foresight, resilience, strategic collaboration and an unflinching commitment to long-term national interests over short-term political wins.

Australia has the resources and strategic location. It must now summon the strategic patience and coordinated leadership needed to build true critical minerals sovereignty.

Australia’s ability to produce basic metals, including copper, lead, zinc, nickel and construction steel, is in jeopardy, with ageing plants struggling against Chinese competition.

The multinational commodities company Trafigura has put its Australian operations under strategic review; these include a lead smelter at Port Pirie in South Australia and a zinc refinery at Risdon, Tasmania.

Its chief executive, Richard Holtum, told a recent conference that the Australian government should consider the future of metal processing capability as a national security issue.

‘In today’s fractured, multipolar world, I would argue that uncompetitive assets… such as Nyrstar Australia [the operating company of the Risdon and Port Pirie plants], shouldn’t be in fully private hands,’ he said.

Critical infrastructure and smelting capacity is a national security issue and therefore needs to probably have some sort of government ownership or significant government support for it, because it is not competitive on an international basis comparing it to the Chinese smelters.

Commodities and mining company Glencore is also calling for government support for copper operations at its Mount Isa smelter and Townsville refinery.

The chief executive of Glencore’s Australian operations, Sam Strohmayr, similarly says there is a national security case for government intervention, arguing that the Mount Isa copper smelter is the only plant able to handle international ores.

We are assessing the future of our copper processing assets against a backdrop of the largest drops in treatment and refining charges in 25 years, with smelters in countries like China and Indonesia heavily subsidised by their governments.

The federal and South Australian state governments have intervened in the case of the troubled Whyalla steel mill. They have appointed an administrator to seize control of the plant from British entrepreneur Sanjeev Gupta and promised to invest the necessary funds to make the mill a going concern that could be sold.

The federal government is also subsidising several rare earths projects. Last year, it added nickel to its list of critical minerals, enabling nickel miners to access the government’s $4 billion critical minerals development fund. But this did not stop the bulk of Western Australia’s nickel processing industry from shutting down in the face of competition from Chinese-owned operations in Indonesia.

The president of the Minerals Council, Andrew Michelmore, whose long career included periods as chief executive of both copper and zinc mining operations, has argued against government subsidies.

‘You can’t prop up something that’s not going to be viable in the long term,’ he told the Australian Financial Review.

We shouldn’t be living on handouts. Otherwise, you will have everyone turning up with their hand out. The issue is the industry is cyclical. You need to see what the long-term modelling looks like.

The Department of Industry’s March 2025 quarterly review of the resource sector outlined the issues facing zinc smelters. Many operate through tolling contracts, handling concentrates from third-party miners for a fee. An expansion of smelting capacity, mainly in China, and a shortage of zinc concentrate due to several mine closures resulted in a collapse of treatment charges from $280 a tonne in 2023 to less than $50 a tonne last year.

From a purely economic perspective, Michelmore is correct. Supporting the survival of inefficient manufacturing diverts resources away from more profitable uses. Australia has prospered greatly over the past two decades because of the huge shift of capital away from inefficient manufacturing to the mining industry, which is the world’s leading resource sector.

However, there is a valid national security concern and, though it is more tenuous, a potential national development concern.

In case of war, Australia would need the capacity to produce basic metals to supply its defence industry.

It is that logic that led the Morrison government to intervene with subsidies to ensure the survival of Australia’s last two oil refineries. Relative to modern refineries in Asia, they are old and inefficient. But the government concluded that Australia needed to preserve its own fuel production capacity.

The national development argument is that as the world’s leading supplier of mineral resources, Australia should foster domestic expertise in metals processing. Australia cannot hope to make a success of processing small quantities of critical minerals, another priority, if it lacks a larger metallurgical sector.

It should be recognised that the competition making Australian operations uneconomic comes in part from Chinese government subsidies.

However, government intervention should be planned and strategic. It would have to include an appraisal of whether the plant, which in many cases dates from the 1960s or earlier, can realistically be given a new life.

There will, as Michelmore says, be the problem of where to draw the line. For example, the closure of Glencore’s Mount Isa smelter would jeopardise the survival of one of the last superphosphate mills in the country at Phosphate Hill in northwest Queensland. The mill relies on the smelter for its supply of sulphuric acid. One could further argue a national security case for preserving a domestic capacity to produce fertiliser.