Critical minerals—such as rare earth elements (REEs), lithium, cobalt, nickel, and copper—are essential to modern technology, driving innovations in renewable energy, electric vehicles (EVs), and defense systems. However, their uneven global distribution and fragile supply chains, combined with rising geopolitical tensions and environmental concerns, pose significant challenges. The growing rivalry between China and the United States over these strategic resources is reshaping global trade and security. This report explores the distribution of critical minerals, the obstacles in their supply chains, and the implications of the China-U.S. competition, providing insights into future trends.
1. Global Distribution of Critical Minerals
The production of critical minerals is concentrated in a handful of countries, creating risks of dependency and supply disruptions. Here’s an overview of the key players:
- China China leads the world in critical mineral production and processing, controlling over 70% of rare earth element (REE) output and 60% of lithium refining. It also dominates graphite production (72% globally) and rare earth processing (85-90% of capacity). This dominance makes China a linchpin in global supply chains and a focal point of geopolitical tension.
- Australia The top lithium producer, Australia supplies 51% of the world’s lithium and holds significant cobalt and nickel reserves, playing a vital role in the EV battery market.
- Democratic Republic of Congo (DRC) The DRC produces 73% of global cobalt, a key component in batteries, but political instability and labor issues increase supply risks.
- Chile A major source of lithium and copper, Chile’s reserves in the Atacama Desert are critical for the energy transition.
- South Africa South Africa supplies 13% of global platinum group metals (PGMs), including rhodium and palladium, essential for automotive catalytic converters.
- Indonesia Indonesia is a rising nickel producer, particularly for EV batteries, contributing to global oversupply and affecting prices.
This geographic concentration means disruptions—whether from politics, natural disasters, or trade barriers—can ripple across global markets.
2. Supply Chain Challenges
Critical mineral supply chains face numerous hurdles, including geopolitical risks and sustainability concerns:
- Geopolitical Tensions and Trade Restrictions China’s export controls, such as recent restrictions on gallium and germanium, have disrupted supplies to the U.S. and Europe, pushing buyers to find alternatives. Its near-monopoly on rare earth processing (85-90% globally) leaves other nations vulnerable, a weakness exposed during the pandemic and trade disputes.
- Concentration of Processing Capacity Processing is more centralized than mining. China refines 68% of cobalt, 65% of nickel, and 60% of lithium, amplifying risks when one country holds such sway.
- Environmental and Social Impacts Mining and processing degrade ecosystems—lithium extraction in Chile depletes water, while rare earth mining in China pollutes soil and water. Social issues, like child labor in DRC cobalt mines, fuel demand for ethical sourcing, though solutions are scarce.
- Market Volatility Small, illiquid markets for critical minerals lead to wild price swings. Lithium and cobalt prices, for example, fluctuate sharply due to supply-demand mismatches, complicating investment.
These issues highlight the fragility of supply chains and the need for diversification and resilience.
3. The China-U.S. Rivalry and Critical Minerals
The contest for critical minerals is a cornerstone of the broader China-U.S. rivalry:
- China’s Strategic Advantage China uses its supply chain dominance as leverage, as seen in its 2010 rare earth export ban on Japan and recent restrictions on gallium and germanium in response to U.S. tech controls. It also invests heavily in foreign mines, especially in Africa (e.g., DRC cobalt) and Latin America, expanding its global reach.
- U.S. Countermeasures The U.S. is working to reduce reliance on China: Domestic Efforts: Funding lithium projects in Nevada and other states. Alliances: Partnering with the EU, Australia, and Canada via agreements like the Mineral Security Partnership (MSP). Friendshoring: Shifting supply chains to allies or back home. The Department of Defense prioritizes REEs and titanium for military use, framing this as a security issue.
- Implications of the Rivalry This competition is redefining trade and alliances, with initiatives like the MSP aiming to sidestep China. China’s resource edge strengthens its bargaining power, while the U.S. pushes technological and economic strategies to counter it.
This struggle extends beyond economics to technology and security.
4. Impact on Global Trade and Security
The race for critical minerals is reshaping global dynamics:
- Strategic Alliances Nations are forming resource-focused partnerships, like the U.S.-EU Critical Minerals Agreement, signaling a new era of diplomacy.
- National Security REEs power precision weapons and titanium strengthens aircraft—disruptions threaten defense readiness, making supply chains a security priority.
- Stockpiling and Diversification Governments are building reserves (e.g., U.S. National Defense Stockpile) and seeking new sources, though current stockpiles fall short.
Critical minerals are now a linchpin of international strategy.
5. Environmental and Social Considerations
Extraction and processing raise serious concerns:
- Environmental Degradation Lithium mining in Chile drains water reserves, and rare earth operations in China contaminate ecosystems.
- Social Issues DRC cobalt mines rely on exploitative labor, including children, pressuring firms to adopt ethical practices with limited success.
- Sustainable Innovation Recycling (e.g., cobalt from old batteries) and alternative materials are gaining traction, with the EU funding magnet recycling to cut reliance on China.
Balancing resource demands with sustainability is a pressing challenge.
With demand for green tech and EVs soaring, critical minerals will grow in importance:
- Demand Growth Copper alone needs $100 billion in investment by 2030 to meet demand, with lithium, cobalt, and nickel also facing shortages.
- Technological Innovation Recycling and substitutes could ease pressures, but these remain nascent.
- Intensifying Competition The China-U.S. rivalry may spark more trade clashes, with China’s lead pitted against U.S. efforts to catch up.
The future depends on addressing these issues while prioritizing security and sustainability.
Critical minerals are unevenly distributed, with China’s dominance in production and processing making it a supply chain powerhouse—and a geopolitical flashpoint. Challenges like trade barriers, concentrated processing, and environmental damage complicate access, while the China-U.S. rivalry adds tension. The U.S. is countering with domestic investment and alliances, while China leverages its edge. This competition is transforming trade, security, and alliances. As demand rises, critical minerals will remain a defining issue, requiring a delicate balance of resource security and sustainability.
