Why Critical Mineral Shortages Are a CEO Issue

CEOs at industrial companies are well aware of potential shortages in critical minerals, and many think they have a plan in place to mitigate those risks. But we consistently find that companies are still underestimating their true vulnerability. Most industrials track their exposure to critical minerals using high-level metrics like spending, information from tier one suppliers, or country-of-origin data. However, true exposure is larger than those metrics suggest. This is because mineral risk often sits deep inside supply chains—inside the components that companies buy, and inside the tools and processes used to make those components. Concentration risks require looking at processing and ownership, not just mineral production at the mine.

A more comprehensive approach can give companies an accurate view of the vulnerabilities in their supply chain. From that baseline, companies can take a range of steps to reduce their exposure. Critically, this approach also helps companies tap into pools of public capital that many countries have allocated. In 2025, public finance commitments to critical minerals in advanced economies reached around $65 billion, more than four times the 2023 level, and most of that money is not yet spent. When companies have a clear sense of their financial exposure, they can build a case to access these funds.

In that way, industrial companies can stop treating critical minerals as a cost item and start treating them as a source of strategic advantage.

Three Blind Spots Understate the Risk

Potential shortages of critical minerals are not new, but the scale of the looming shortfall is striking. In our proprietary model, the demand for key inputs—including rare-earth elements (REEs) and more common products like graphite, copper, and lithium—will be roughly 120% to 250% of forecast supply through 2040. New demand is coming primarily from batteries and electrification (which together are projected to increase the demand for critical minerals 20-fold by 2040), but also from the AI buildout and increased defense spending (segments that are projected to cause demand to triple and quadruple, respectively).

In response, the conventional move is to turn to procurement teams to fix the exposure. But this analysis will not give CEOs the full picture. Leaders need to be aware that the broadly prevailing metrics will lead to three critical blind spots.

Blind Spot 1: Overweighting Dollars Spent. Companies often start their risk assessment by looking at their bill of materials, leading them to worry about materials like copper and lithium that are large in tonnage and in procurement dollars. But the more dangerous exposures are often in “mosquito minerals” that are so small by traded value that they never reach the risk register, yet so essential that entire high-value chains stop without them. (See Exhibit 1.)

For example, REEs comprise roughly 40% of the cost of a magnet but less than 1% of the total value of an electric vehicle that requires the magnet. That is too cheap to appear in any cost review that would flag it as a risk, yet a shortage of these elements can stop a production line.

Similarly, a fighter jet uses about 20 kilograms of REEs, which are worth less in total than the paint that coats the plane. Those minerals are a rounding error in percent of unit cost, yet the aircraft does not fly without them.

Rare-earth elements have been getting a lot of attention lately, but the list of “mosquito minerals” is much longer. Consider the following examples:

• Gallium. The entire global market for gallium is worth less than $350 million a year, with annual production of only about 900 tons—making it negligible compared to most other commodities. Yet we estimate that approximately $3.5 trillion worth of final products depend on gallium, including high-speed logic and power chips, AI GPUs, and 5G and satellite communications components. For many of these applications, substitutes are either not available or are technically challenging, with long lead times.
• Germanium. Global sales of germanium each year only total about $260 million, but it is an essential component of electronics and fiber optics, and AI is hungry for both. A recent series of events—export licensing in 2023 followed by an outright ban on exports to the US in 2024 and a cut-off of Japan in early 2026—created severe market turmoil. Germanium prices during this period roughly quadrupled in western markets, trading at a substantial premium to Chinese volumes.
• Arsenic. Virtually no companies list arsenic as a strategic risk, yet in ultra-high-purity form it is indispensable to the gallium-arsenide (GaAs) semiconductors in 5G/6G telecom infrastructure, along with AI data-center optics, radar systems, and defense electronics. The upstream market is minuscule (about $50 million worldwide), and producing semiconductor-grade arsenic (99.999995% pure, also known as 7N5) takes years of accumulated process know-how, with supply chains highly concentrated. China controls about 90% of refining volume, and a single Japanese producer supplies roughly 60% of the world’s ultra-high-purity arsenic. One facility, in one of the most seismically active countries on earth, and no credible alternatives. That is the problem in its purest form: negligible spend by companies, no risk-register entry, and an entire class of advanced and defense electronics that stops without it.

The economics of “mosquito” minerals has an additional wrinkle: they are often recovered as byproducts from other mining and industrial processes. Their supply is therefore set by the market dynamics of the host metal, not their own. So even a sharp price spike does not reliably call forth new production the way it would for a primary commodity.

Blind Spot 2: Looking Solely at Tier One Suppliers. Companies tend to look at critical minerals in the products and components they buy from their direct suppliers. Yet a company that buys almost no critical minerals directly can still be acutely exposed, because minerals arrive embedded in components. A motor, magnet, power module, laser, or sensor carries upstream mineral content, leading to dependencies that may not appear on a raw-materials line.

Another reason that companies understate risk is that minerals are not only in the product. They are in the processes required to create products: the crucibles, sputtering targets, furnace internals, catalysts, dies and consumables of suppliers’ production lines, and in the capital equipment itself.

For example, turbine blades, engine blocks, and structural aerospace components are machined with cutting tools made of tungsten carbide bonded with cobalt, chosen because no other material holds an edge at the temperatures and speeds that modern precision machining requires. The cutting tools wear down and need to be replaced. Tungsten mining and refining are heavily concentrated in China, which has in recent years tightened export licensing on tungsten products. Cobalt carries its own concentration risk through the Democratic Republic of Congo (DRC), where production is dominated by a small number of foreign operators. A manufacturer that has never bought a gram of tungsten or cobalt directly can still find its production line stopped by a shortage of the tooling that cuts its parts—a dependency that does not show up on any bill of materials.

Blind Spot 3: Focusing on Mineral Production Rather Than Processing and Ownership. Companies map their exposure to where critical minerals are mined. But processing—not production—is the bottleneck for some minerals. For example, China refines roughly 90% of rare earths and holds the know-how to turn ore into usable magnets. Similarly, it processes some 65% to 70% of lithium and cobalt and around 70% of graphite. Australia produces lithium and ships more than 90% of its spodumene to China to be processed.

Some industrial companies are beginning to factor processing concentration into their risk calculus. But another aspect that few companies measure is ownership of those assets. A map of where assets sit and a map of who owns them can look radically different. Consider cobalt and nickel. (See Exhibit 2.)

• Cobalt shows concentration at the mining stage. The DRC accounts for roughly two-thirds of global mined cobalt production, with major operations majority-owned by Chinese companies.
• Nickel shows concentration at the refining stage. Indonesia hosts close to 70% of upstream nickel capacity, while Chinese companies and shareholders account for a majority of Indonesia’s nickel-refining capacity. Moving a supply contract from a Chinese refinery to an Indonesian one may not change a company’s geopolitical risk exposure.

A Missed Opportunity to Access Public Funds

On their own, the three blind spots are bad enough. But they also mean that companies are missing out on valuable capital from public sector vehicles. If organizations don’t know the full scope of their risk, they don’t realize the opportunities they might have to tap into these resources.

In 2025, public finance commitments to critical minerals in advanced economies reached around $65 billion, more than four times the 2023 level. These structures are not free money; they carry conditions—typically reporting obligations, governance rights, localization requirements, and screening. They are also not a full solution. Instead, they’re meant to be a catalyst, reflecting about one-tenth of the overall capital required to meet the demand for critical minerals through 2040. But they are funds that the private sector can tap into to build a competitive advantage.

Thus far, the vast majority of this capital has been committed but not yet spent. Our review of government-backed vehicles as of mid-2026 found that the flagship instruments are in the early stages of deployment. Some countries have spent less than 10% of their allocated capital; others have spent nothing yet. (See Exhibit 3.)

These vehicles are explicitly designed to draw private capital through measures such as co-investment, guarantees, and—in particular—offtake requirements, which are typically the primary eligibility gate. This is where the three blind spots above are holding companies back. Without a clear sense of their own exposure and a diligent framing of the opportunity, companies cannot make a credible commitment.

That said, there already are encouraging success stories. Several of the companies that have managed to reframe their critical minerals approach and take advantage of these pools of public capital are not mining companies; they are industrial companies and trading firms:

• Siemens Gamesa, the wind-turbine manufacturer, signed a binding five-year supply contract with Arafura Rare Earths, an Australian company building a roughly $1 billion REE mine and processing plant in Australia’s Northern Territory. The contract locks in supply of neodymium and praseodymium—two REEs refined into the magnets inside wind-turbine generators—starting at 200 metric tons a year in 2026 and rising to 400 metric tons a year by year three, for use in turbines assembled at Siemens Gamesa’s factory in Cuxhaven, Germany. Beyond supply, the deal offered other advantages. Germany’s economics ministry had said it would consider backing Arafura’s mine with an export-credit guarantee of up to $600 million on one condition: that Arafura sign offtake contracts with German companies that would process the material domestically. Siemens Gamesa’s contract was structured to satisfy exactly that condition, and Germany’s development bank has since added its own direct investment in the project. In effect, Siemens Gamesa didn’t just secure magnet material for itself; it unlocked public financing for the mine that will supply it.
• Mitsui, the Japanese industrial operations, trading, and investment conglomerate, acquired the right to buy 40% of copper concentrate produced by the Josemaria deposit in Argentina, part of a large copper district jointly owned by mining majors BHP and Lundin Mining, with first production expected around 2030. Mitsui didn’t negotiate this directly with the mine’s owners. It won the right through a public tender run by the Japan Organization for Metals and Energy Security (JOGMEC), the Japanese government agency created specifically to secure raw-material supplies for Japanese industry. JOGMEC held the offtake right first, then retendered it to Japanese companies, and Mitsui was the winning bidder. Based on early production estimates, that 40% share works out to roughly 77,000 metric tons of copper a year—supply that Mitsui controls solely because it went through a government-run allocation process rather than a private deal with the mine.
• Traxys, a global physical commodity trader and merchant in metals and natural resources, was named one of the founding procurement partners for a US critical-minerals stockpile known as “Project Vault”—a roughly $12 billion facility, combining about $2 billion of private capital with a $10 billion loan from the US Export-Import Bank, intended to hold reserves of rare earths, cobalt, gallium and other minerals the US government considers vulnerable to supply disruption. Rather than a government agency buying and storing the minerals itself, Washington is paying trading firms to do the actual sourcing—Traxys, alongside peers Hartree Partners and Mercuria. For Traxys, this leverages its trading and logistics capabilities into a paid, recurring role building and running a piece of US strategic-reserve infrastructure, a line of business that didn’t exist before the reserve was created. Since Project Vault’s announcement, Traxys has signed offtake agreements with mining companies Abenojar Tungsten, NioCorp Developments, Arafura Rare Earths, and Andromeda Metals to bolster US supply of key minerals including high-purity alumina, ferroniobium, scandium oxide, and tungsten concentrate.

While the paths differ for these companies, they have a common thread: all three went through a stage of discovery led by the CEO and executive team to identify and correct their blind spots and then reframe their position as a strategic opportunity. Those examples should encourage other companies to get more proactive about creating a strategic advantage from critical minerals, including tapping into public sector capital.

Five Steps to Resilience

To manage critical minerals risk, companies often rush to implement measures that seem promising but ultimately don’t pay off. (See “How Not to Manage Critical Minerals Risk.”) Instead, becoming more resilient to critical minerals vulnerabilities requires a portfolio of five moves, escalating in complexity and organizational commitment. These all require investment, but they generate benefits that go beyond resilience to include direct business value in terms of pricing power, preferred supplier status, and other advantages.

1. Map exposure across the entire value chain. Companies can’t manage what procurement data hides. Instead, they need to determine the mineral content of their products at a more granular level (including subcomponents and processes along the supply chain). They should identify upstream risks all the way to the mine and assess the level of concentration in processing and refining, the ownership of those facilities, qualification lead times for replacements, and the overall share of revenue at risk.

One company partnered with BCG to systematically map material flows this way and identified $5 billion of value at risk, across more than 15 commodities, that had previously not appeared anywhere in its procurement data.

2. Diversify suppliers before they are needed. Companies can also qualify alternative suppliers, mineral grades, and geographies before they need them, accepting that identification and qualification is a long process that must start early. Prioritize the chokepoints, not the easy swaps, and make sure diversification actually reduces concentration. Some organizations broaden their component supplier base without realizing that those suppliers all depend on the same upstream chokepoints.

3. Design out dependence on constrained minerals. Engineer flexibility into the product through multigrade designs, reusable components or materials, or substitute chemistries (as Tesla did when it switched to cobalt-free iron-phosphate batteries for its electric vehicles). Specify components that can run on multiple materials—copper or aluminum windings, for instance—so the company can switch on price or availability without requalifying the whole product. The aim is to prevent the most constrained minerals from being single points of failure.

4. Recover materials through circular design. Orchestrate product flows so that end-of-life material gets collected and reused. The simplest version is a return incentive—a discount on the new unit when the old one is handed back. The most powerful is a closed loop in which ownership of the metal never really transfers. Industrial-level catalysis already makes this standard practice. Precious-metal catalysts are essentially leased, and the platinum-group metals are reclaimed and re-refined for the next charge, rather than sold into the market. Done well, circularity turns a company’s installed base into a captive “mine” that generates repeatable value over time.

5. Secure supply through greater access and control. In situations where a mineral is crucial and poses a severe commercial risk, and the previous measures are not sufficient to mitigate the risk sufficiently, companies can shift from buying it to controlling the supply. That could entail long-term and take-or-pay offtake agreements, building up strategic inventory, coinvesting in public vehicles across multiple buyers, or minority equity or joint ventures upstream. However, these measures need to be implemented with caution, as they expose companies to a new risk: overexposure to market cycles. They also may require coordination among multiple players. It is also exactly in those situations where partnering with the public sector becomes most relevant.

Where to Start

Companies don’t need to apply all five measures, and they don’t need to start at the beginning and work their way up. Three criteria determine where to focus efforts. (See Exhibit 4.)

• Is the concern cost or availability? If a mineral is physically available but its price swings matter commercially, the more accessible measures at lower levels will likely suffice. For example, an EV manufacturer that wants to reduce its exposure to price swings in copper can design for material agility by specifying windings that run on copper or aluminum. Conversely, if the mineral has a trivial cost but no substitute—such as rare-earth magnets and high-purity arsenic—a shortage can stop production, and companies must apply more complex measures like circularity or control.
• How long is the qualification cycle for new suppliers? This is the input that most frameworks omit. A mineral that is in principle widely available but takes three years to requalify behaves, operationally, exactly like a scarce one. Treat lead time as a form of scarcity. The most prominent example in this domain is titanium for aerospace and other high-tech applications. Titanium in itself is not scarce, but the manufacturing process requires complex, time-consuming qualification steps that do not allow a company to simply switch suppliers.
• Does the move actually reduce measured concentration? The second measure—spreading risk out—is where most programs fail. Broadening the component supplier base while every supplier still traces to the same upstream choke is motion without a meaningful reduction in risk.

The question for CEOs and boards is not whether the company is exposed to critical mineral supply dynamics. It is. Instead, the real question is whether the company intends to live with that exposure or turn it into an advantage. A proactive approach can help companies manage risk more effectively, tap into public capital, and shape the market that competitors will have to adapt to.