While downstream processing and manufacturing offer a significant opportunity for Australia, there is a caveat.
If Australia was to pursue a battery manufacturing future, a comprehensive economic assessment into the battery value chain should be carried out.
As the Grattan Institute indicated in a recent report, downstream processing and manufacturing should be supported in Australia “only as far as we can create and maintain a competitive advantage”.
“An abundance of raw materials does not necessarily translate into anadvantage as a manufacturer,” Grattan said.
“Australia’s advantages in energy and materials are maintained when turning ores to metals and metals to active materials, but shrink on turning active materials to cells.”
The Grattan Institute referenced the below graph when highlighting its point, with cost dynamics changing the further up the value chain Australia goes.
As energy comprises a smaller percentage of the overall cost further up the value chain, other cost pressures such as tax and imported materials increase.
“Australia has 50 per cent of the world market for the raw materials required for battery manufacture, but less than 1 per cent of the market for the next stages in the chain: metallurgy to turn ores into metals and then producing active materials; followed by cell manufacturing and assembly,” Grattan said.
“And the battery market is highly fragmented across applications and technologies, implying some upfront choices will required.
“Moving beyond cell manufacture to battery assembly further dilutes Australia’s comparative advantages, because at that stage, labour costs would make up a greater percentage of costs or the process would need to be highly automated.
“There is no fundamental reason why highly automated manufacturing should not be pursued in Australia, although we have few successful examples to build on.”
The Grattan Institute suggests that before the Federal Government is to subsidise manufacturing of advanced products that use Australia’s critical minerals, an independent assessment of the costs of the full value chain should be carried out.
This encompasses costs for tax, logistics, labour and imported materials, when compared to competitor countries.
“Any policy to promote moving up the value chain can then focus on areas where Australia truly has a competitive advantage,” Grattan said.
“We note the national security concerns that China’s dominance of parts of the supply chain endangers Australia’s access to materials and products.
“But the best way to mitigate this risk is not necessarily to manufacture something ourselves. We should also explore diversifying supply, stockpiling, signing agreements with friendly allies to allow access to reserves, and making an effort to switch to products, practices, or technologies that are less vulnerable to supply chain disruptions.”
Attention on Australia’s downstream opportunity has gathered pace in recent years, as local miners such as Mineral Resources, IGO and Pilbara Minerals establish their own downstream processing projects and operations.
But such a significant transformation should be supervised closely, given the multi-faceted and precise nature of a value chain such as battery manufacturing.
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