Global decarbonisation goals, the digital revolution and economic growth are driving an unprecedented rise in demand for critical minerals. At the same time, Southeast Asian nations are positioning themselves for varied roles in critical minerals supply chains. Indonesia, Malaysia, the Philippines and Vietnam could expand as major resource producers and processors, while Singapore could become a minerals finance, investment and trading hub.

However, weak infrastructure, uneven environmental regulation, climate pressures, fragile social licence and heavy reliance on China threaten Southeast Asia’s critical-minerals supply chain resilience and environmental sustainability. Australia—having a strong resource base and mining expertise, as well as established environmental, social and governance (ESG) credentials—is well equipped to help Southeast Asia overcome these obstacles and to support its transition to a leading critical-minerals powerhouse.

Indonesia’s rapid expansion of nickel production and downstream processing, financed by companies from China, has upended market dynamics but raised concerns over environmental and labour standards. Chinese companies, led by Tsingshan, CATL and Lygend, have poured huge capital and technology into Indonesia, now controlling over 75 percent of its nickel refining capacity. Their dominance has allowed Indonesia to rapidly expand output, driving down global prices and leaving producers in countries such as Australia struggling to compete, while making it harder for others to diversify away from China-linked supply chains.

Beyond nickel, Australia has pursued bilateral partnerships with a few Southeast Asian countries to develop vertically integrated supply chains, controlling more than one stage in the process. With Indonesia, agreements signed in 2023 and 2024 aim to combine Indonesian nickel and Australian lithium for electric-vehicle batteries, while fostering regulatory alignment and joint oversight.

Lynas Rare Earths’ Malaysia branch has produced its first dysprosium oxide from a newly commissioned heavy rare earths line and plans to add terbium production, positioning itself as a rare non-Chinese source of these critical inputs for high-performance magnets used in electric vehicles and advanced electronics.

Vietnam has likewise elevated critical minerals in its diplomacy with Australia. In March, Australia and Vietnam elevated their ties to a comprehensive strategic partnership, launching an annual dialogue on critical minerals to strengthen supply chain diversification beyond China.

Australia and Singapore’s landmark Green Economy Agreement, signed in 2022, established a new pillar in the two countries’ comprehensive strategic partnership. This pillar aims to foster bilateral cooperation in clean energy and critical minerals supply chains to drive trade diversification, regional energy security, and the transition to net zero. This highlights how critical minerals are increasingly embedded in broader clean energy cooperation frameworks.

These are only a few examples. Across Southeast Asia, countries with diverse governance systems and uneven regulatory capacity have achieved varying progress in balancing foreign investment, sustainability, and strategic alignment on critical minerals.

Southeast Asia’s critical-minerals sector is shaped by compelling opportunities and complex risks. A study conducted by the Association of Southeast Asian Nations and the Intergovernmental Forum on Mining highlights a ‘two-fold opportunity’ to expand mining and upgrade manufacturing value chains. But uneven data and limited processing capacity reveal persistent gaps in exploration and downstream development.

Challenges remain for both Southeast Asia and Australia. Southeast Asia’s mix of governance systems includes weak environmental regulation and a fragile social licence to operate. To build credibility and attract investment, Southeast Asian producers could emphasise cleaner production methods and stronger ESG standards, pursuing products such as sustainably produced Indonesian nickel. Australia is well positioned to support this transition by providing technical expertise, high labour and environmental standards, and investment in cost-competitive mining and processing operations that meet ESG standards.

At the same time, Australia faces challenges in gaining traction in areas where China dominates. For example, Chinese companies control most refining and downstream capacity in Indonesia’s nickel sector. However, global efforts to diversify supply chains away from China may create further openings.

Looking ahead, Southeast Asia’s long-term gains from the critical minerals boom will depend on investment, good governance and effective management of geopolitical competition. Building credibility as a trusted supplier will also require stricter environmental and labour standards across the region.

Australia can contribute by partnering in exploration, mining and processing projects; sharing technical expertise; and strengthening regional capacity for cleaner, more efficient supply chains. Such cooperation offers Southeast Asian nations a pathway to embed higher standards, attract investment and secure a more resilient position in global clean-energy transitions.