The geopolitics of critical raw materials: Who controls the future?

The curse of geography

The distribution of critical raw materials (CRMs) represents a multilayered and complex phenomenon that has received considerable attention in recent years, especially in global supply chains and sustainability. Mining and processing of critical raw materials are concentrated in specific localities, allowing a few countries to dominate the entire sector. Australia leads in iron ore and lithium production, essential for steel manufacturing and battery technologies, while Chile is the world leader in producing copper. China is a superpower when it comes to graphite and rare earths, which are critical for modern technology. The Democratic Republic of the Congo (DRC) is a key cobalt producer while platinum and iridium are mainly mined in South Africa. Indonesia dominates nickel with almost half of global production.

The processing phase is even more pronounced, with China now accounting for 100 percent of refined natural graphite and dysprosium (a rare earth element), 70 percent of cobalt, and nearly 60 percent of lithium and manganese. Besides the specific uneven geographic distribution of critical raw materials that pose considerable supply security risks, geopolitical tensions and an unstable environment in producer regions actually compound these risks. For instance, 70 percent of cobalt mined worldwide comes from the Democratic Republic of the Congo, a country limping under political instability. The high probability of disruptions in the supply chains could lead to price fluctuations with ripple effects across various sectors reliant on these materials. The concept of ‘criticality’ in reference to raw materials has grown into a crucial framework for understanding the risks associated with supply interruptions such as geographic concentration of production, economic dependencies, and political (in)stability.

Can we go ‘green’ without CRMs?

UN Secretary-General António Guterres has warned that halting global warming is urgent before reaching the tipping point and that ‘we are playing Russian roulette with our planet’. The threshold is already dangerously close because the planet has just experienced the 12 hottest consecutive months on record. The recent technological imperative is to facilitate a ‘green transition’. There is a common agreement among scientists to take action against the accelerating calamities of climate change, which necessitate the introduction of technologies that phase out fossil fuels as the predominant source of CO² emissions contributing to temperature increases.

The introduction of ‘green’ energy sources will depend on getting numerous minerals and metals into the industrial scene. The European Commission has considered 34 CRMs by using a specific methodology to determine criticality (economic importance and supply risk). The phasing out of coal mines and oil fields, at the same time, is met with plans for establishing over 300 new mines for these critical minerals. Worldwide demand for CRMs is forecasted to double from current levels by 2030 and quadruple by 2040. Global demand for raw battery materials (lithium, graphite, and nickel) is projected to increase by 14, 19, and 20 times in 2040 compared to 2020. By 2030, cobalt demand is expected to grow to four times its 2020 levels. The US Department of Defence has marked cobalt as a material that ‘has critical applications in high-capacity batteries for military and commercial electric vehicles’. While the quantities of minerals that the rest of the world bought were relatively modest, this was not a big problem, but as the demand began to grow drastically, all the shortcomings of such a situation became apparent. Therefore, the fight against global warming in the most developed Western countries currently depends entirely on the ability to get CRMs from a few countries that have a monopoly on their production, with China leading the way.

Increase in blackmail capacity

When countries control natural resources, they have a more considerable stake in international relations and can exert influence over economic and political decisions. Moreover, the current energy transition has changed the character of geopolitical relations as countries seek to secure access to renewable energy and the materials necessary to harness them. Countries of the Global South, abundant with strategic raw materials, are becoming increasingly important players in the newly evolving geopolitics prone to leveraging natural resources. The implications of this shift unsettle traditional dynamics of power and economic relationships.

Some CRMs have extremely broad applications on the commercial and military fronts, beyond renewable energy. They come in with the full package, including mobile phones, computer hard disks, electric vehicle batteries, precision missile guidance, and high-tech ammunition. China is the world’s largest producer of lithium batteries for electric mobility, commanding a 60% stake in the global electric vehicles (EV) market. By strategically manipulating the supply chains for clean technology, through mining, metallurgy, and material sciences (often referred to as ‘three Ms’), China has largely kept other players out. The EU and the USA, on the contrary, are extremely dependent on the import of CRMs from abroad and thus on the international commodity markets and access to foreign mines. Accordingly, to date, commodities coming from China account for 98% of the rare earth elements (REEs) supply to the EU. 

The potential for blackmail through resource control could lead to increased tensions and conflict as nations struggle for access to CRMs. Critical mineral security is intrinsically linked to the escalating trade war between the USA and China. China’s initiative to diminish or terminate the exportation of certain essential materials, including germanium and gallium, to the United States in the previous year has already manifested a significant effect on their bilateral trade dynamics, whereas a prospective augmentation of such prohibitions may function as leverage for Beijing in tariff negotiations with the Trump administration. China has effectively ceased exports of both wrought and unwrought antimony metal, a material of paramount importance to the military sector.

The EU has also found itself in a difficult position, currently lacking sufficient CRMs needed for new technologies on its territory. Imports are becoming increasingly problematic after the war in Ukraine closed the northern routes and instability in the Middle East made the Red Sea route very risky. The USA, the UK, and the European Union have developed strategic plans to minimise reliance on Chinese supplies. But in the case of CRM, this is very difficult due to the mentioned uneven geographical distribution. An ace up one’s sleeve may lead to a reduction in tensions between the warring parties. Otherwise, the Western technology industry is in serious trouble.

Resource nationalism and balancing policy as a future trend

A significant political trend – resource nationalism, has gained momentum among resource-rich nations as they seek to consolidate control over their natural resources. The motives behind resource nationalism often involve maximising revenue from one’s natural resources. Numerous military regimes within Africa’s ‘coup belt’ have endeavoured the renegotiation of mineral development agreements. Predominantly, these measures are underpinned by threats of total revocation of operating licenses. In other terms, the coup-belt nations are coercing foreign mining companies to accept new terms or confront the prospect of expropriation. In the Republic of Mali, the military regime under Assimi Goita has enacted a revised mining code that authorises the government to take up to 35% interest in mining ventures. In the Republic of Guinea, the military regime led by Mamady Doumbouya protected the nation’s iron ore deposits. The military governance in Niger has similarly revoked the mining concessions held by the French enterprise Orano and the Canadian firm GoviEx Uranium. The Democratic Republic of the Congo seems to have aligned with this emerging trend although Chinese mining companies control vast cobalt deposits in that country.

Australia’s critical minerals sector is constantly growing in response to the increasing global need for a secure supply of these vital and strategic minerals. Australia’s Identified Mineral Resources shows that Australia has retained its position as the world’s largest producer of lithium (52%) and rutile (27%) and is also a top five world producer of cobalt (3%), manganese ore (10%), rare earths (5%), tantalum (4%), and zircon (25%). Exporting countries like Australia have been forced to adopt strategic responses to mitigate risks associated with hostile working environments created by the US-China trade war. Studies find that exporters will often employ balancing strategies to achieve some degree of market diversification away from such conflicting superpowers yet maintain a competitive advantage.

This demonstrates the need for exporters to operate in a complicated geopolitical landscape, which will challenge or even require them to reconsider their market strategies as well as their market relationships. Owners of critical material deposits want to be above the conflict and secure both markets for their products. Chile is the backbone of resource production worldwide. It has the largest copper reserves, production, and exports, while also being the world’s second-biggest lithium carbonate producer and the unique producer of natural nitrate. China is Chile’s largest trading partner, accounting for 40 percent of its total exports. Chile and the EU have signed an agreement on raw materials value chains and the sustainable mining sector. A national strategy will seek to balance the two poles of power (West and East) with a plan to reduce the risk caused by geopolitical tensions and foster various supply chain solutions.

The key challenge for exporting countries is to formulate a balanced approach to deal with geopolitical disruptions during a trade war between superpowers. CRMs are crucial for the modern technological development of the most powerful countries. Therefore, it seems that the importance of the CRM industry often overrides geopolitics. The best illustration of this is Donald Trump’s recent warning to Ukraine. Trump conditioned further support for Ukraine on enabling access to the Ukrainian rare earth materials. ‘I want to have security of rare earth’, Trump snapped. In the end, we can freely conclude that whoever controls the production of CRMs, controls the fate of global technological development!

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