Report

The geopolitics of critical minerals

This report from UK think tank the Henry Jackson Society examines the geopolitics of critical minerals.

The average global citizen rarely thinks or talks much about rare earth elements (REEs).

However, these 17 metallic elements are indispensable to everyday life, forming the backbone of high-tech devices such as mobile phones, cameras, computer hard drives and electric vehicles (EVs). Beyond their civilian applications, REEs are also critical for defence technologies, including precision missiles and fighter jets.

Furthermore, demand for REEs is anticipated to rise significantly in the coming years due to their crucial role in the green energy transition and decarbonisation. More specifically, “The demand for rare earth elements is expected to grow 400-600 percent over the next few decades, and the need for minerals such as lithium and graphite used in EV batteries could increase as much as 4,000 per cent.”

Given their significance and wide-ranging applications, one might assume that countries have carefully devised strategies for securing the supply of these critical minerals. Yet the world remains largely reliant on China, which currently dominates the market: “it’s responsible for 70% of global production and nearly 90% of processing of global output, as well as 90% of rare earth element permanent magnet production.” To put the implications of that control of the market into perspective, “China could cut short the supply of critical minerals to the U.S. in an event of war, and exhaust the U.S. stock of minerals necessary for its defence apparatus in less than 90 days.”

China’s involvement in the REEs market started back in the 1980s “and, by the mid-1990s, it had taken centre stage. By combining ever-increasing mining activities and intensive acquisition of rare earth shares in other countries, China managed to secure over 95 percent of global production by 2010.” In the past, when relations with China were more favourable than they are today, the West fared quite well from a deal whereby China oversaw the mining and processing of REEs. This deal allowed Western nations to secure a steady supply of REEs without shouldering the severe environmental costs associated with the mining and production of these critical minerals. However, years later, this dynamic has granted China a monopoly-like control over the critical minerals market.

More problematically, China has shown a serious propensity to leverage this control and use it for gaining political influence over many countries. As an earlier Henry Jackson Society report shows, “in 2010, during its territorial disputes with Japan… China threatened to withhold REEs exports to Japan.” Moreover, “in July 2023, China announced export restrictions on gallium and germanium products, which are essential for computer chips and other components” in a move seen as retaliation for the United States’ decision to restrict technology sales to China. Finally, in December 2023, “China announced a ban of rare earth extraction and separation technologies.”

It seems that China’s control of the market is here to stay. The latest report by the College of William & Mary in the United States shows that “China has closed its fist around critical minerals required for the global energy transition and net-zero emissions initiatives… [by using] a network of 26 state-backed financial institutions over the past two decades.”

And while Western nations have taken steps to boost domestic supply and/or seek other sources to get their much-needed supply from, to fully diversify away from China will take time, with experts arguing that “these responses might be too little, too late, or not aggressive enough, given China’s entrenched position.” On the other hand, if adequate responses to this domination are not found, the Western world will continuingly be dangerously dependent on China. More importantly, it will continue to lose influence in other REE-rich nations, such as the Democratic Republic of the Congo and Mongolia, if China succeeds in securing or maintaining total control over their markets.

Thus, to assist the world in its struggle to diversify away from China, this report examines the geopolitics of critical minerals. It focuses on how China has weaponised and effectively monopolised control over these essential resources, increasingly leveraging them as instruments of foreign policy and political influence