“China currently controls 90% of the global processing capacity for rare earth elements and over 80% of the processing for other critical minerals like cobalt, gallium, and graphite,” according to a statement about the recently announced Critical Materials Future Act.
In a rapidly shifting global landscape that includes a push toward clean energy transitions, war, and growing trade tensions, critical minerals are becoming increasingly critical — and the U.S. is finding itself increasingly vulnerable to its outsized reliance on less-than-friendly nations to obtain them.
In Part One of this two-part series, we’ll provide some background on critical minerals and explore factors contributing to the increasingly tight spot the U.S. finds itself in.
What are critical minerals?
According to the American Critical Minerals Association (ACMA), critical minerals are “certain minerals or mineral materials determined by the government as essential to our economy and national security, and whose supply may be subject to costly disruptions. While the criticality of a particular mineral or mineral material may change over time, these resources are necessary to the manufacturing of products in virtually every sector of the United States economy.”
In 2022, the United States Geological Survey (USGS) released a new list of 50 mineral commodities critical to the U.S. economy and national security — along with a brief description of the applications for each:
- Aluminum, used in almost all sectors of the economy
- Antimony, used in lead-acid batteries and flame retardants
- Arsenic, used in semi-conductors
- Barite, used in hydrocarbon production.
- Beryllium, used as an alloying agent in aerospace and defense industries
- Bismuth, used in medical and atomic research
- Cerium, used in catalytic converters, ceramics, glass, metallurgy, and polishing compounds
- Cesium, used in research and development
- Chromium, used primarily in stainless steel and other alloys
- Cobalt, used in rechargeable batteries and superalloys
- Dysprosium, used in permanent magnets, data storage devices, and lasers
- Erbium, used in fiber optics, optical amplifiers, lasers, and glass colorants
- Europium, used in phosphors and nuclear control rods
- Fluorspar, used in the manufacture of aluminum, cement, steel, gasoline, and fluorine chemicals
- Gadolinium, used in medical imaging, permanent magnets, and steelmaking
- Gallium, used for integrated circuits and optical devices like LEDs
- Germanium, used for fiber optics and night vision applications
- Graphite , used for lubricants, batteries, and fuel cells
- Hafnium, used for nuclear control rods, alloys, and high-temperature ceramics
- Holmium, used in permanent magnets, nuclear control rods, and lasers
- Indium, used in liquid crystal display screens
- Iridium, used as coating of anodes for electrochemical processes and as a chemical catalyst
- Lanthanum, used to produce catalysts, ceramics, glass, polishing compounds, metallurgy, and batteries
- Lithium, used for rechargeable batteries
- Lutetium, used in scintillators for medical imaging, electronics, and some cancer therapies
- Magnesium, used as an alloy and for reducing metals
- Manganese, used in steelmaking and batteries
- Neodymium, used in permanent magnets, rubber catalysts, and in medical and industrial lasers
- Nickel, used to make stainless steel, superalloys, and rechargeable batteries
- Niobium, used mostly in steel and superalloys
- Palladium, used in catalytic converters and as a catalyst agent
- Platinum, used in catalytic converters
- Praseodymium, used in permanent magnets, batteries, aerospace alloys, ceramics, and colorants
- Rhodium, used in catalytic converters, electrical components, and as a catalyst
- Rubidium, used for research and development in electronics
- Ruthenium, used as catalysts, as well as electrical contacts and chip resistors in computers
- Samarium, used in permanent magnets, as an absorber in nuclear reactors, and in cancer treatments
- Scandium, used for alloys, ceramics, and fuel cells
- Tantalum, used in electronic components, mostly capacitors and in superalloys
- Tellurium, used in solar cells, thermoelectric devices, and as alloying additive
- Terbium, used in permanent magnets, fiber optics, lasers, and solid-state devices
- Thulium, used in various metal alloys and in lasers
- Tin, used as protective coatings and alloys for steel
- Titanium, used as a white pigment or metal alloys
- Tungsten, primarily used to make wear-resistant metals
- Vanadium, primarily used as alloying agent for iron and steel
- Ytterbium, used for catalysts, scintillometers, lasers, and metallurgy
- Yttrium, used for ceramic, catalysts, lasers, metallurgy, and phosphors
- Zinc, primarily used in metallurgy to produce galvanized steel
- Zirconium, used in the high-temperature ceramics and corrosion-resistant alloys.
Global Critical Minerals Outlook 2024
In its Global Critical Minerals Outlook 2024 published May 17, the International Energy Agency (IEA) said that although global supply of certain critical minerals ramped up in 2023, “major additional investments” are still needed to meet the world’s energy and climate objectives.
“Secure and sustainable access to critical minerals is essential for smooth and affordable clean energy transitions. The world’s appetite for technologies such as solar panels, electric cars and batteries is growing fast – but we cannot satisfy it without reliable and expanding supplies of critical minerals,” said IEA Executive Director Fatih Birol in a press release. “The recent critical mineral investment boom has been encouraging, and the world is in a better position now than it was a few years ago, when we first flagged this issue in our landmark 2021 report on the subject. But this new IEA analysis highlights that there is still much to do to ensure resilient and diversified supply.”
An Executive Summary of the report says that in 2023, critical minerals saw significant growth, with lithium demand increasing by 30% and demand for nickel, cobalt, graphite and rare earth elements increasing from 8% to 15%.
“Clean energy applications have become the main driver of demand growth for a range of critical minerals,” IEA said. “Electric vehicles (EVs) consolidated their position as the largest consuming segment for lithium and increased their share considerably in the demand for nickel, cobalt and graphite.”
Among the many highlights of the report, the IEA said although regions that include Latin America, Indonesia, and Africa have all shared in the benefits of market expansion for mining — China dominates when it comes to refining.
“Nearly 50% of the market value from refining is concentrated in China by 2030,” the agency said. “China also sees a rise in market value for mined materials with its growing copper and lithium production.”
Noting that although critical mineral prices had fallen in 2023 compared to the year prior, the IEA said countries are still investing in exploration and mining — including China, which had “significantly” increased its spending on acquisition of overseas mines over the previous ten years “reaching record levels of USD 10 billion in the first half of 2023 with a particular focus on battery metals such as lithium, nickel and cobalt.”
The IEA also underscored the fact that the critical minerals supply chain is concentrated among a handful of countries.
“Between now and 2030, some 70-75% of projected supply growth for refined lithium, nickel, cobalt and rare earth elements comes from today’s top three producers,” the agency said. “For battery-grade spherical and synthetic graphite, almost 95% of growth comes from China. These high levels of supply concentration represent a risk for the speed of energy transitions, as it makes supply chains and routes more vulnerable to disruption, whether from extreme weather, trade disputes or geopolitics.”
Why is the U.S. vulnerable?
A big reason the U.S. is vulnerable in the critical minerals arena is due to lack of domestic capacity to mine and refine what’s needed for a variety of applications essential to daily living and national security. As a result, America is highly dependent on other countries to meet its needs — like China, with which the U.S. has growing trade tensions in this context.
In a January 8, 2024 article for the Center for Strategic & International Studies (CSIS),
Gracelin Baskaran, Director, Critical Minerals Security Program described these dynamics in the context of China’s ban on exports of rare earth’s processing technology — which was announced December 21, 2023.
“This has significant implications for U.S. national, economic, and rare earth security,” Baskaran wrote. “Rare earth elements—a group of 17 metals—are used in defense technologies, including missiles, lasers, vehicle-mounted systems such as tanks, and military communications. They are also used in computers, televisions, and smartphones, along with various clean energy technologies central to decarbonization.”
She noted that at that time, China was producing 60 percent of the world’s rare earths — but processing almost 90 percent, “which means that it is importing rare earths from other countries and processing them.”
“This has given China a near monopoly,” Baskaran said. “Benchmark Minerals Intelligence has flagged that the United States is particularly exposed to processing restrictions for heavy rare earths, given China separates 99.9 percent of them. The United States has been aware of this vulnerability but has only meaningfully acted on it within the last several years…”
She also cited a December 2023 report published by the Select Committee on the Strategic Competition between the United States and the Chinese Communist Party: Reset, Prevent, Build: A Strategy to Win America’s Economic Competition with the Chinese Communist Party.
“It recommended that ‘Congress should incentivize the production of rare earth element magnets, which are the principal end-use for rare earth elements and used in electric vehicles, wind turbines, wireless technology, and countless other products,’” Baskaran wrote. “Specifically, it advocated that Congress should establish tax incentives to promote U.S. manufacturing.”
Noting the “substantial global reserves of rare earths outside of China, including 19 percent in Vietnam, 18 percent in Brazil, 6 percent in India, and 4 percent in Australia—which amounts to nearly half of the world’s supply,” she said these America-friendly countries provide plenty of options for diversifying sources, but the U.S. will need to rapidly increase domestic processing capacity in order to protect its security interests across the board.
“There are two main reasons for this,” Baskaran said. “First, China has technical know-how in this area that other countries lack. … Second, although several separation, processing, and manufacturing facilities are under construction, it can take years to complete construction and fully operationalize them.”
China’s export restrictions continue to build
In an August 20 CSIS article, Baskaran and colleague Meredith Schwartz discussed China’s antimony export restrictions that were announced August 14 and took effect September 15.
“Antimony is a critical input for the defense industry, particularly for armor-piercing ammunition, night vision goggles, infrared sensors, bullets, and precision optics, and the electronics industry, including semiconductors, cables, and batteries,” Baskaran and Schwartz wrote. “This is the latest restriction after a series of export controls in 2023 on graphite, germanium, gallium, and rare earth processing technologies, raising alarms in the semiconductor, electric vehicle, and defense industries that rely on these materials.”
Describing China as “the world’s leading producer of antimony, accounting for 48 percent of global production and 63 percent of U.S. antimony imports,” they said antimony supply disruptions will likely now increase “significantly,” which means the U.S. must pivot quickly to non-Chinese sources to secure the antimony it needs.
Baskaran and Schwartz provide a detailed analysis of the new restrictions, potential impacts on the U.S., and needed steps to mitigate it. For more, please see the full article.
U.S. Trade Vulnerabilities in Critical Minerals
In an October 22 article for TD Economics, “U.S. Trade Vulnerabilities in Critical Minerals: Pressure Points Amid Rising Tensions,” economist Andrew Foran provides a detailed look at the evolving dynamics related to America’s precarious critical minerals position — as well as the push-back with which the U.S. is countering in the form of tariffs.
Referencing the 2022 USGS list of critical minerals, Foran says that for most of them, the U.S. has “minimal domestic deposits or refining capacity and as such is largely dependent on its trading partners to procure the supplies that it needs.” He adds that China “dominates global refining capacity for over half of the critical minerals listed, which creates a challenge for the U.S. amid rising trade tensions between the two nations.”
Those rising trade tensions are reflected in China’s growing list of critical minerals export restrictions, as noted by Baskaran and Schwartz:
- Gallium (August 2023)
- Germanium (August 2023)
- Graphite (December 2023)
- Antimony (September 2024)
“China has used export restrictions on critical minerals to benefit its domestic market, but more recently it has used them to punish nations for taking actions that it disagrees with,” Foran writes. “…Fast-forwarding to today, China has announced restrictions on exports of four critical minerals to the U.S. in retaliation for recent U.S. trade measures. …”
He says China strategically selected these specific critical minerals, since the U.S. relies on the country for at least 25% of its imports for all four.
“This reliance is even higher in the case of graphite (42%) and antimony (63%),” Foran explains. “China also exercises significant control over the complete supply chains of most of these minerals, which will complicate the ability of the U.S. to find alternatives.”
However, the U.S. has been making moves of its own, he says, implementing tariffs on several critical minerals from China to reduce reliance on the country.
U.S. Import Tariffs (effective September 2024, except graphite, which takes effect in 2026):
- Aluminum
- Chromium
- Cobalt
- Graphite
- Nickel
- Niobium
- Indium
- Manganese
- Tin
- Tantalum
- Tungsten
- Zinc
But it’s more than just access to critical minerals the U.S. needs — there’s also the issue of refining capacity, which is sorely lacking.
“China has developed advanced knowledge of refining techniques for many critical minerals over the past few decades as it established the dominant global position that it holds today,” Foran writes. “A lack of access to that knowledge, while foreseeable amid the current state of trade tensions between the two countries, will make the U.S. ambition for alternative sources of refined critical minerals more challenging.”
For more of Foran’s in-depth analysis, please see the full article.
And please join us next week as we examine how the U.S. is working to secure its critical minerals supply chain.
