Australian critical minerals to feed UAE energy transition in new trade deal

A new trade agreement between Australia and the United Arab Emirates could boost investment in critical minerals Down Under to feed the energy transition in the Middle East.

Don Farrell, Australian minister for trade and tourism, said Sept. 17 that negotiations on the Australia-United Arab Emirates Comprehensive Economic Partnership Agreement had concluded. S&P Global Commodity Insights learned that the agreement will be signed within a month.

The deal, which is Australia's first trade agreement in the Middle East, will see over 99% of Australian products enter the UAE tariff-free, resulting in estimated tariff savings of A$135 million in the first year and A$160 million per year once the agreement is fully implemented. The package includes a framework to encourage two-way investment.

Farrell told journalists in Canberra Sept. 17 that free trade agreements with the UAE are often followed by sovereign wealth fund investment. The Critical Minerals Prospectus released Sept. 4 "gives the opportunity for the [UAE] to start investing in some of those projects," the minister said.

"If [the UAE wants] to go further downstream and into manufacturing [of clean energy technologies], then they'll foster Australian projects. If you're going to do it, you've got to be integrated, like China is dominating the critical metals and the battery materials commodities because it integrated as a nation," said Chris Reed, CEO of Neometals Ltd. The company's Barrambie titanium and vanadium project in Western Australia was one of the 55 projects cited in the prospectus.

UAE could replicate China strategy

Farrell said the UAE presents Australian miners an opportunity to diversify the markets for their products. Reed said the UAE will likely mimic China's playbook in backing Australian critical minerals mines and process material back in the UAE using cheap and abundant solar renewable energy, which could be a better option as "energy is expensive in Australia."

"[China] financed mines in Western Australia and Africa, then takes the concentrates back to China, ... processes minerals and produces electric vehicles as the end product," Reed told Commodity Insights.

The UAE may also choose to invest in downstream plants Down Under and ship the product back to be manufactured into clean energy technology, Reed said. The CEO has discussed with UAE academics the use of graphene membranes for direct lithium extraction.

Alumina the big winner, but Australia can't produce more

Alumina is among Australia's key exports to the UAE, and West Australian producers "in particular" will benefit from the removal of tariffs, Resources Minister Madeleine King said in a Sept. 17 statement to Commodity Insights.

Most of the Australia's alumina exports come from Western Australia, and the removal of a 5% tariff on Australian alumina will translate into savings of about A$70.4 million for the state alone and A$72 million nationally, Commodity Insights learned.

Australia's alumina exports to the UAE soared to 2.2 million metric tons in 2022 from just 243,300 metric tons in 2021, according to Commodity Insights data. Exports slightly declined to 2.0 MMt in 2023, when alumina exports to the UAE were valued at A$1 billion, according to Farrell.

However, "Australia won't be able to produce more" alumina for the UAE after the planned closure of the Kwinana refinery in Western Australia, April Kaye Soriano, alumina analyst for Commodity Insights, said in an email interview. The country's remaining refineries will not be able to make up for the 2.2 MMt cut in capacity from Kwinana as refineries in Queensland have operated at reduced capacities due to a gas leak, the analyst said.

Soriano believes that the UAE is "trying to secure supply due to the lack thereof in the global market."

"The alumina market is currently experiencing a supply deficit due to various refinery curtailments and bauxite problems," the analyst said. Commodity Insights forecasts a 3 MMt deficit for alumina by the end of the year and a supply shortfall that could continue through 2027.

Metallurgical alumina is the feedstock to aluminum smelters, and Soriano said "there might come some increase in the [UAE's] aluminum smelter capacity due to improved technologies (such as that of Emirates Global Aluminium PJSC) that can increase demand, but it's not significant."

The UAE was the fifth-largest aluminum producer globally in 2023, according to S&P Global Market Intelligence's asset-level data, and was the second-largest export destination for Australian alumina in the first half of 2024 after Bahrain.

Iron, steel, gold, nickel, coal and diamonds will also benefit from duty-free access into the UAE, saving Australian non-agricultural exporters an estimated A$110 million in tariffs per year, Commodity Insights learned.

Australian steel exports to the UAE have been rising since 2021, while coal exports to the Middle East country have been more volatile, according to Market Intelligence data.