The Geopolitics of Minerals Security

The moves toward improving critical raw materials security have more to do with geopolitics than mineral insecurity. It is common knowledge that critical raw minerals and rare earths underpin our sustainable and technological futures. China’s reach is quietly growing behind minerals critical to a wide range of products that will shape the future. Facing more restrictive foreign investment policies in developed markets, Chinese firms are pursuing such key minerals as lithium and cobalt in other locations. Investment agencies believe China will continue to build its influence over these minerals and the industries that rely on them as it works with governments keen on foreign investments across the developing world.

What is the Minerals Security Partnership?

The Minerals Security Partnership (MSP) aims to accelerate the development of diverse and sustainable critical energy minerals supply chains by working with host governments and industry to facilitate targeted financial and diplomatic support for strategic projects along the value chain.? MSP partners include Australia, Canada, Estonia, Finland, France, Germany, India, Italy, Japan, Norway, the Republic of Korea, Sweden, the United Kingdom, the United States, and the European Union (represented by the European Commission).?

The goal of the MSP is to ensure that critical minerals are being “produced, processed, and recycled in a manner that supports the ability of countries to realise the full economic development benefit of their geological endowments." Specifically, the MSP focuses on critical minerals that are inputs for electric vehicles and advanced batteries. Participating countries pursue investment in mining, processing and recycling development that maintains high environmental and social governance standards.?

At present, countries largely rely on market forces to deliver a secure supply of minerals to industry. For much of their future mineral requirements, it is likely that the market will deliver at the scale they need. However, for some critical minerals, the market is not working effectively. Since the 1980s China has, through state intervention and subsidies, been building capabilities and establishing control of many critical mineral markets. Now other governments including Australia, Canada, Japan, the US and various European countries are accelerating efforts to secure their own supplies.

The Geopolitics of Critical Materials

Each critical material has a unique geography of trade which, on an aggregate level, entangles countries in a broader web of interdependence. All countries rely on a functioning global market for critical materials and related technologies, given that they either import these commodities or rely on a steady demand for their materials, components or finished products. Trade patterns vary enormously across countries, sectors and technologies, and reveal the true interdependence of countries in terms of mineral supply and demand.

Supply chains are currently vulnerable to diverse geopolitical risks. Interruptions in the supply of minerals can affect multiple industries and reverberate throughout the economy. Supply shortages and related risks could arise, particularly in the short to medium term, as demand for selected materials increases, and mining and processes remain concentrated. In the medium to long term, trade flows for critical materials are unlikely to lend themselves as easily to geopolitical influence as oil and gas. This is because reserves of such materials are abundant, geographically widespread and can be processed in many locations only if there is capacity to do so.

While the MSP is presented as a framework for sustainably developing supply chains of critical minerals, it has been argued to also be an attempt to establish a counterweight to China in the critical minerals sector (and a "friend shoring" initiative by the US). It seeks to provide an alternative, especially for lower-income countries for project financing. Resource-rich countries entering into discussions with MSP partners or China, for that matter, may want to make sure they include the trade risks and potential measures they may face when deciding which club to support or join.

A Divided World - USA and China

The strategic competition between the United States and China has become the defining geopolitical challenge of the current era. As tensions escalate across multiple domains – from trade and technology to military posturing – it is crucial to understand the underlying logic driving each nation’s approach.?

At the core of this competition lie two distinct “theories of victory”: overarching visions of how each power aims to prevail in the long term. These theories fundamentally shape crucial policy decisions, diplomatic manoeuvres, and resource allocations. By examining how the U.S. and China perceive the nature of their contest and plot their paths to success, we can better anticipate the trajectory of this competition and its profound implications for the future global order.

For the global order and smaller countries, this strategic competition has profound implications. The world is likely to see increased fragmentation in technology standards, trade networks, and even value systems. Smaller nations may find themselves under stronger pressure to align with either the United States or China in different domains, potentially leading to a new form of bloc politics. However, this also presents opportunities for astute middle powers to leverage the competition to their advantage, potentially by playing both sides or forming their own coalitions.

Ultimately, the outcome of this contest will shape the rules, norms, and power dynamics of the 21st century. As the theories of victory of both powers continue to play out, the world must navigate the challenges and opportunities presented by this new era of great power competition. The ability of other nations to defend their own autonomy and foster cooperation in critical areas may well determine whether this strategic competition leads to a more fragmented and conflict-prone world or to a new, stable international order that accommodates both established and rising powers.

Conclusion

At present China produces 60% of the world’s rare earths but processes nearly 90% which means that it is importing rare earths from other countries and processing them. This has given China a near monopoly.

There are substantial global reserves of rare earths outside of China, including 19% in Vietnam, 18% in Brazil, 6% in India, and 4% in Australia - which amounts to nearly half of the world’s supply. These are countries the United States and its allies are friendly with, which means there is ample opportunity to diversify sources. However, rapidly scaling up domestic processing capacity is pivotal to protecting national and energy security. Leveraging industrial policies, such as tax incentives and fiscal subsidies, to reduce the cost of doing business for processing firms becomes vital to achieving this.

The strategic competition between the United States and China has become the defining geopolitical challenge of the current era.

The United States’ delay in developing processing capacity will hinder its ability to build both national, energy and economic security. There are two main reasons for this. First, China has technical know-how in this area that other countries lack. For example, it has an absolute advantage in solvent extraction processing for rare earths because Western companies have struggled to roll out these advanced technical operations alongside pollution concerns. Second, although several separation, processing, and manufacturing facilities are under construction, it can take years to complete and fully operationalize them.

The rollout of major export restrictions for graphite, gallium, germanium, rare earth extraction, and separation technologies in less than one year should be a powerful signal to U.S. policymakers that although they are late to the critical minerals game, there is a significant need to both build domestic capabilities and leverage international cooperation to facilitate rapid sourcing and developing of processing capacity.

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Ms Adrienna Zsakay is the Founder and CEO of Circular Economy Asia Inc., and this article represents her opinions on the circular economy. Circular World Pick of the Week is brought to you by Circular World? Media — a brand owned by Circular Economy Asia Inc.

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References

'China’s global reach grows behind critical minerals' by Charles Chang, Diego Ocampo, Claire Yuan, Annie Ao, Stephen Chan, and Avery Chen, published by S&P Global, 24 August 2024.

'Minerals Security Partnership' published by the US State Department

'Minerals Security Partnership' published by the IEA, updated 06 May 2024

'Policy paper - Resilience for the Future: The UK’s Critical Minerals Strategy' published by the UK Government, 13 March 2023

'Geopolitics of the Energy Transition - Critical Materials' published by the International Renewable Energy Agency, date unknown.

'Critical Minerals Supply Chains: The Minerals Security Partnership and Trade-Related Challenges' by Jasper Wauters and Nikolas Hertel, published by White & Case, an international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, 07 October 2024

'The Long Game: Understanding US and China’s Theories of Victory' by Ngo Di Lan, published in The Diplomat, September 21, 2024

'What China’s Ban on Rare Earths Processing Technology Exports Means' by Gracelin Baskaran, Research Director and Senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies (CSIS), published by the CSIS, 08 January 2024.