Despite increasing policy focus on value-adding within Australia’s critical minerals sector, the development of a domestic midstream industry has seen limited progress beyond feasibility stage. This paper provides a commercially grounded assessment of why midstream processing and refining continue to develop offshore, despite Australia’s strong resource endowment and growing strategic importance. The analysis identifies a set of persistent structural constraints. These include high and volatile energy costs, limited domestic demand, lack of integration with downstream industries, constrained access to capital, infrastructure gaps, and shortages in specialised metallurgical expertise. These challenges are particularly acute in non-commoditised critical minerals markets, where products are low-volume, non-fungible, and must meet precise customer specifications – resulting in thin margins and limited tolerance for cost inefficiencies. A central finding is that standalone midstream operations in Australia are rarely commercially viable under current conditions. This position has not materially shifted over the past 12–18 months, with most projects remaining at feasibility stage and limited evidence of scaled domestic processing. As a result, value add continues to occur in jurisdictions with lower-cost energy, established chemical industries, and closer proximity to end markets. International experience reinforces that successful midstream industries do not develop in isolation. They require co-location with downstream demand, access to reliable and competitively priced energy, coordinated government support, and integration into broader industrial ecosystems. Without these co-existing conditions, midstream development remains structurally challenged. The paper concludes that Australia’s midstream ambitions must be more tightly aligned with commercial realities. This includes prioritising upstream project development, focusing on a limited number of strategic commodities, investing in enabling conditions – particularly energy – and pursuing targeted international partnerships to integrate into allied value chains. The key message is clear: investment will follow commercial viability, not policy ambition. Without addressing the underlying structural constraints, Australia risks continuing to export raw materials while value creation occurs elsewhere.