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.