“The raw materials the modern economy cannot function without — and often cannot easily replace.” Critical minerals are naturally occurring materials deemed essential to national economic prosperity, clean energy systems, and defense applications, whose supply chains are characterized by concentration risk, limited substitutability, and geopolitical vulnerability.
Executive Summary
The energy transition — driven by EVs, wind turbines, solar panels, and grid-scale batteries — has created explosive demand for a set of minerals whose supply is highly concentrated geographically and, in many cases, dominated by China in processing and refining. Lithium, cobalt, nickel, manganese, graphite, and rare earth elements (REEs) underpin the battery supply chain; gallium, germanium, and indium are essential to semiconductor manufacturing; tungsten and titanium are irreplaceable in defense applications. Western governments have designated critical minerals as a national security priority and are racing to diversify supply chains through subsidies, partnerships, and trade agreements — with mixed success.
The Strategic Mechanism
Critical mineral vulnerability arises from concentration at multiple points in the value chain:
- Mining concentration: DRC produces roughly 70% of global cobalt; Chile and Australia dominate lithium; China leads in rare earths, graphite, and several others
- Processing concentration: China processes approximately 60% of global lithium, 70% of cobalt, 85% of rare earths, and 90%+ of natural graphite — even when ore is mined elsewhere. Processing is where China’s dominance is most complete and hardest to displace
- Refining-to-battery concentration: Chinese companies CATL and BYD control a dominant share of global EV battery cell manufacturing, embedding Chinese critical mineral supply chains into end products sold globally
- Export control leverage: China has deployed export restrictions on gallium, germanium, graphite, and rare earth processing technologies as counter-measures to Western semiconductor export controls — demonstrating the coercive potential of mineral supply concentration
- Long lead times: New mines take 10–17 years from discovery to production; processing facilities take 5–10 years. Supply chain diversification is inherently a decade-scale undertaking
Market & Policy Impact
- China’s July 2023 export controls on gallium and germanium — essential to semiconductors and defense electronics — were widely interpreted as a direct response to U.S. chip export controls, signaling the beginning of a critical minerals export control counter-escalation
- The IRA’s critical mineral content requirements have mobilized billions in investment in allied-country mineral projects, though most new capacity remains years from production
- The Minerals Security Partnership (MSP), launched 2022, coordinates Western government financing and offtake commitments to incentivize allied-country mine development
- DRC cobalt mining’s association with artisanal child labor has created ESG supply chain liability for battery manufacturers and accelerated investment in cobalt-free battery chemistries
- Rare earth processing outside China remains economically challenged due to environmental costs and China’s competitive pricing, which has historically undercut Western processing investment
Modern Case Study: China’s Graphite Export Controls and EV Battery Supply Chain Exposure, 2023–2025
In October 2023, China imposed export licensing requirements on natural and synthetic graphite — covering roughly 95% of global graphite anode supply for EV batteries. The controls required exporters to obtain government licenses, with approval uncertain for shipments to Western markets. Battery manufacturers in the U.S., Europe, and South Korea — who had made limited progress diversifying graphite supply — faced acute near-term exposure. The controls accelerated investment in graphite anode production in Canada, Mozambique, and Tanzania, and pushed battery chemistry development toward silicon anode alternatives. By 2025, graphite supply chains remained substantially China-dependent, illustrating the difficulty of rapidly diversifying critical mineral processing even with strong policy intent and financial incentives.