Navigating global trade: Implications and opportunities for Australian mining businesses
In the ever-evolving landscape of global trade, Australian mining businesses face a myriad of challenges and opportunities.
The evolving geopolitical landscape is steering us toward an increasingly complex trading environment burdened by increasing protectionism, costs and barriers to trade. Concurrently, shifts in demand and supply are emerging as critical minerals markets, developing economies, global demographics, artificial intelligence and technologies all undergo significant change. This article delves into the insights and challenges present, focusing on the opportunities for Australian miners and the strategies they can employ to mitigate value-erosion and protect value creation.
Global trade challenges and risks
One significant challenge is the proliferation of protectionism, seen through the imposition of tariffs (which seek to protect local industry across either broad-based or select commodities), and the rise of export controls and sanctions that seek to control the movement of sensitive goods and technologies.
Additionally, non-tariff barriers (NTBs) are becoming more prevalent, affecting 70 per cent of global trade. These barriers, used as protectionist or retaliatory measures, can significantly disrupt value chains, increasing costs and causing delays. The cost of complying with NTBs is estimated to raise the landed cost of imported materials by 7.5 per cent, posing a substantial challenge for mining businesses with complex supply chains.
Proactive tariff and cross border regulatory management can unlock significant value and risk mitigation for trade exposed miners compared to those that take a passive or reactive position
Tariffs have reduced by ~20 per cent in the last 15 years with 365 comprehensive Free Trade Agreements (FTAs) (up from 22 in 1990), including over 110 FTAs across mining-intensive countries such as Chile, Australia, Canada and various African countries.
Punitive tariffs are on the rise and target key project/construction inputs. For example, the consequence of tariffs on steel and aluminium on end-customers will indirectly affect miners through contracted demand for key commodity inputs. We would therefore expect China’s demand for these raw commodities to contract in response to the drop in demand for steel and aluminium.
Opportunity: Proactive management of general tariff duty exposure may unlock up to 10 per cent in cost savings (excluding punitive tariffs). Refund provisions may also be available historically for FTA concessions that have not been utilised. Successful deployment of tariff mitigation strategies (like accessing FTA concessions) requires both a technical understanding of complex legislative requirements and contractually enabled visibility to understand source and shipping of procured goods.
Non-tariff measures can significantly disrupt inbound and outbound value chains, adding cost and delays
NTBs are increasingly being used by key export markets as a protectionist or retaliatory measure (eg coal, barley, lobsters).
Opportunity: Various regulators provide access to differentiated regulatory arrangements to mitigate the impact of these measures where the business can demonstrate that robust systems, controls and processes are in place to manage the relevant risk (eg biosecurity/quarantine screening to prevent the introduction of pests, trade compliance to demonstrate adherence with cross-border regulations, safety and security protocols to ensure cargo security and safety, etc.)
Governments are increasingly using cross-border mechanisms to apply ESG regulations
Miners need to understand not only their ESG obligations but those that arise downstream that may impact supply and demand for their minerals. For example, in battery manufacturing, Zimbabwe has implemented export bans on lithium concentrate effective 1 January 2027 in a bid to further local processing and battery production capabilities. The EU has introduced a 'Battery Passport' which mandates the declaration and traceability of carbon footprints for batteries including those in electric vehicles. This is in addition to the existing recycled content covenant in place for batteries. Similarly in parts of Australia we are seeing bans on hard waste of batteries, in a bid to force greater content of recycled battery content in new batteries.
Europe has also introduced a Carbon Border Adjustment Mechanism (CBAM) that, from 1 January 2026, will apply a carbon price equivalent to emissions intensive commodities imported from countries without a recognised emissions trading/carbon pricing scheme. Targeted commodities include iron, steel, aluminium, fertiliser, cement, clinker and lime.
The recent adoption of the International Maritime Organisations Net-Zero-Framework (IMO NZF) effectively embeds a global emission intensity standard into large ocean-going maritime supply chains. Where maritime trade does not reduce its emission intensity in accordance with the IMO NZF, increased penalties will be applied and the total cost of trade will be impacted. It is currently unclear how the IMO NZF will interact with jurisdictional carbon pricing/emission intensity mechanisms, such as the EU ETS (maritime) and FuelEU standards.
Opportunity: Carbon border adjustments and other environmental measures (product standard, extended producer responsibilities, etc.) may introduce unforeseen costs (CAPEX and OPEX) depending on the commodity and origin. Strategically accounting for ESG obligations when making sourcing decisions will provide Total Cost of Ownership, identify value leakage (eg suppliers using baseline purchases to create new value streams or fund ESG innovation to meet regulatory compliance obligations) and support optimal procurement decisions. Conversely, the ability to provide carbon abatement traceability to customers will provide them with a competitive advantage as they seek to manage their own increasing carbon border adjustment liabilities.
For IMO NZF, ship operators (and the industries they transport) should be prepared for increased environmental reporting and related financial obligations throughout the supply chain.
The proliferation of export controls, bans and sanctions introduces significant financial, criminal and reputational risk to global operations
Countries are increasingly expanding or introducing export controls and sanctions obligations to control the movement of sensitive or critical goods and technologies.
Australia’s export controls regime (which covers technologies routinely used in the energy, utilities and resources industries), recently introduced new offences for non-compliance punishable by up to 10 years in jail or $825,000.
China’s recent ban on rare earth exports to the United States requires companies to secure export licenses to export the restricted elements. China controls ~90 per cent of global rare earth elements. Australian mining companies with operations in China need to determine the new costs involved with this trading scheme.
Opportunity: Centralising management of export controls and sanctions activities (which often sit across disparate functions of mining organisations) will aid in identifying risk exposure and managing ongoing compliance obligations.
Final considerations on how global trade management can be a strategic lever to enable future growth
Due to the nature of mining operations and markets, miners are inherently exposed to the increasing risks and challenges of the global trade environment. The demands on business to connect the right resources (both internally and externally) to manage these effectively becomes more difficult. These challenges may result in substantial value leakage and/or reputational damage without the commensurate maturity in global trade-related strategies, controls, processes and systems to manage them. Key things to consider include:
- What level of maturity exists across understanding and responding to these current and emerging risks and opportunities?
- Is responsibility and ownership centralised with strategic decision-makers or decentralised and fragmented across functions, assets and regions?
- Are we reactive and transactional in how we deal with these issues?
- Do systems and processes enable the rapid synchronisation of supply and demand and enable market diversification?
- Are we engaging with the right regulatory bodies and industry players on key trade and cross-border-related issues? Are we engaging at the right level?
For more details, contact Paul Cornick or Lara Jobling on PwC’s Global Trade page.