The Geopolitics of Critical Minerals: Navigating Scarcity, Concentration, and Control

Critical minerals concentration is no longer a hypothetical risk. Countries are using value chain chokepoints for geopolitical leverage, with potentially wide-ranging implications for industries across the globe. The prospect of critical sectors halting production for lack of magnetic rare earth elements (REEs) or battery minerals, for example, has generated a sense of urgency among business leaders and policymakers. This tension is compounded by projections of sharply rising demand over the coming decades. The AI boom is driving demand for data center equipment such as semiconductors, which require gallium, germanium, and silicon metal. Other drivers include rising defense budgets, broad technology adoption, energy security concerns, and infrastructure buildout. (See the sidebar “Geopolitics Is Affecting Demand for Critical Minerals.”) As a result, the world has entered a new phase of geopolitical competition over critical minerals, with governments actively using policy tools to secure supply and shape the global market.

President Xi's state visit to Washington, DC in September 2026 saw an extension of the trade truce between the US and China, according to which China suspended certain export controls and licensing requirements in return for lower US tariffs. This is only one case highlighting the geopolitical dynamics around critical minerals. In another, China limited exports to Japan in early 2026 amid rising diplomatic tensions. Meanwhile, the US has asked Canada to grant it the right of first refusal and access to critical minerals has featured prominently in discussions concerning Ukraine’s reconstruction efforts following Russia’s invasion in 2022. ¹ 1 S&P Global, “US demand for right of first refusal on Canadian minerals 'impossible': experts” (August 18, 2026); International Trade Administration, “Ukraine Country Commercial Guide: Critical Minerals” (May 15, 2026). These geopolitical complexities affect businesses across many sectors, including automotive, chemicals, and consumer electronics, making the topic essential for executives. Business leaders need to understand the global map of critical mineral value chains and the geopolitical dynamics driving the market to ensure their competitive advantage now and in the years ahead.

A Unipolar Critical Minerals Landscape

The critical minerals value chain includes three broad steps that often cross borders: extraction, processing, and manufacturing. Our quantitative analysis shows that China is the only integrated superpower in the global critical minerals market. (See the sidebar “Methodology.”) Nevertheless, the Big Nine extraction powerhouses (Australia, Brazil, Canada, Chile, the Democratic Republic of the Congo [DRC], Indonesia, Kazakhstan, Russia, and South Africa) and the Industrial Five manufacturers (the EU, Japan, South Korea, the UK, and the US) also have influence in some parts of the value chain. (See Exhibit 1.)

No individual economy comes close to matching China’s composite score across the value chain. As a leader in extraction—although not necessarily in reserves—it outproduces the rest of the world domestically in 8 of the 23 most critical minerals while remaining a major producer of many others.

China’s sizable heavy industry enables it to extract metals such as gallium, germanium, and vanadium as byproducts of base metals processing and iron and steel smelting. As for processing, China possesses more than half the global share of 16 minerals, and one-third or more of 3 others. And in manufacturing, China’s industrial strength as the top exporter of EVs, solar PV, and batteries reinforces its leadership in extraction and processing.

Three factors explain China's decades-long rise: it leveraged its existing minerals reserves, such as in REEs, for industrial growth; it built an integrated value chain that moves from extraction to processing and manufacturing; and it overcame its own geographic limits by investing in assets overseas to ensure reliable supply for its growing midstream and downstream industries. (See the sidebar “China’s Strength Is Not by Accident but by Design.”)

The Big Nine and the Industrial Five wield considerable influence on different parts of the value chain, but China’s processing strength largely locks them into China-centric value chains. (See Exhibit 2.)

Led by the Big Nine, extraction powerhouses are major producers and net exporters of major raw critical minerals, and often have substantial raw material reserves. But they have not built significant processing capacity. This has pushed them into a higher level of integration with Chinese value chains, and over the past five years their dependence on China for exporting raw critical minerals has risen by 15 percentage points.

Key manufacturers, including the Industrial Five, are large net importers of raw and processed minerals to feed their industrial bases. Their heavy reliance on China’s midstream processing compounds this dependence.

The Race to Diversify Supply Chains

Because control over critical minerals is concentrated and strategically valuable, these resources have become a flashpoint between superpowers. Just as the US has leveraged its control over chokepoints by enacting semiconductor export controls, China has institutionalized export controls on the minerals over which it has the most leverage. These are usually “mosquitoes”—not large by market size, but highly critical across sectors—and China leads in both extracting and processing them. (See Exhibit 3.)

Despite the extension of the aforementioned trade truce, China maintains export controls on 16 minerals, including 7 medium and heavy rare earths. This constraint prevails in addition to export bans imposed on specific companies and industries—such as the US and other nations’ defense sectors—which have already caused delays, temporary shortages, and sourcing complications.

The US and other countries exposed to supply challenges perceive the current landscape as a strategic risk and are taking action in response. The number of policy measures affecting the sector globally has increased by 367% since the pandemic and reached a new high in 2025. Policymakers across industrialized nations are using a wide array of tools, some of which were considered unconventional just a few years ago, to speed up diversification. (See Exhibit 4.)

Following its declaration of a national energy emergency, the US has stepped up direct interventions, including the incorporation of supply-side measures such as taking equity stakes in relevant companies. For example, the Pentagon invested $400 million in MP Materials to expand rare earth element processing at Mountain Pass, California, and enlarge a magnet production facility. To create demand for diversified supplies, the US has also issued procurement mandates for defense players and has initiated stockpiling through Project Vault, a public-private partnership designed to aggregate demand and serve as a lever to stabilize the market.

Other industrialized nations have their own supply concerns, even if some of them put greater emphasis on other sectors, such as cleantech. For example, the EU enacted the Critical Raw Materials Act to diversify supply chains, and it is now discussing the possibility of establishing a European Corporation on Critical Raw Materials to secure supplies and build stockpiles. Although Japanese firms and the Japan Organization for Metals and Energy Security have been active players for more than a decade, the country is now debating an expansion of the state-owned entity’s role.

Governments are also engaging with international partnerships—both established and new—in response to supply chain challenges. The US has convened the Forum on Resource Geostrategic Engagement (FORGE) to push for a plurilateral preferential trade zone that protects producers from external disruption, including unwanted competition and price fluctuations. It has also signed MoUs with partners including Japan, the EU, and Australia to complement FORGE. The G7 has established the Critical Minerals Resilience and Production Alliance with the goal of reducing dependence on any single non-allied country for rare earths and permanent magnets to less than 60% by 2030 and to 50% as soon as possible, with targets for other critical minerals set to follow.

As countries move to diversify their supply chains, the scale of the task is enormous. Two issues demonstrate the challenge and suggest that any supply diversification will likely be a gradual process.

First, across industrialized economies, financing for capital intensive minerals projects has long been a key bottleneck due to high operating cost and price volatility. This situation is starting to change, and governments are mobilizing capital. Public finance announcements have reached $65 billion, up fourfold since 2023. However, announcements don’t guarantee disbursements. Paradoxically, investment by companies in critical minerals production actually decreased in 2025, according to 2026 data from the International Energy Agency (IEA). ² 2 IEA, Global Critical Minerals Outlook 2026 (July 2026). The IEA estimates that by 2040, the world economy will need more than $500 billion for mining and $200 billion for processing of energy-related critical minerals.

Second, China is actively protecting its value chain position. For instance, it has bolstered its technological capabilities in processing by enacting export controls of technology and knowledge. Consequently, the IEA does not expect the concentration picture in key minerals processing to change significantly over the next ten years. ³ 3 IEA, Global Critical Minerals Outlook 2026 (July 2026). Moreover, leading Chinese processing companies are increasingly investing in capacity abroad, complicating the picture of dependencies and diversification.

Intensifying Competition in the Global South

As countries diversify their critical mineral supply chains, some Global South nations—particularly in Africa, South America, and Southeast Asia—have become pivotal sourcing clusters. China is already an established leader in the Global South, with a substantial corporate footprint across many countries, including the DRC and Indonesia.

African nations, which account for a significant part of the Global South, remain key to China as well as to the US and other Western nations seeking to diversify their supply chains and reduce their dependence on chokepoints. (See Exhibit 5.) The US and its allies have developed new bilateral partnerships, such as with the DRC, that include preferential mineral access and, often, security and defense aspects. Infrastructure funding—including a recent US International Development Finance Corporation financing package of more than $500 million, alongside EU support—is advancing the development of the Lobito rail corridor to enable transport of minerals from the DRC to western ports. ⁴ 4 DFC, “DFC Strengthens Strategic Partnerships with the Democratic Republic of the Congo and Rwanda to Bolster Supply Chain Security and Economic Growth” (December 5, 2025); DFC, “DFC Announces Investments Supporting Development Along Lobito Corridor” (December 4, 2024); Global Gateway Forum, “EU–Angola partnership advanced through major investments in the Lobito Corridor” (October 2025).

• Value Capture. Indonesia instituted export bans on raw nickel exports in 2020 to attract more investment in domestic processing capacity and in the battery value chain. The DRC and some other African nations followed. Countries are also pushing to improve the terms of legacy contracts to demand more investment and in-country value addition. The DRC and a Chinese consortium recently renegotiated a deal for the Sicomines copper and cobalt joint venture, which includes larger infrastructure commitments from the foreign investors. ⁵ 5 Mining.com, “Congo, Chinese partners sign reviewed Sicomines copper-cobalt joint venture agreement” (March 14, 2024).
• Government Revenue Raising. Royalties from mining are an important source of revenue for large extraction countries, as critical minerals offer opportunities to broaden the tax base. Some countries also implement export duties. A single export window, championed by Indonesia, requires exports to pass through a single state-controlled entity that oversees pricing, tax collection, and proceeds.
• Price Influencing. Some extraction powerhouses are exerting influence by imposing export quotas and withholding volume for strategic reserves to stabilize prices in their favor. These policies offer leverage to producers, but they are limited by their dependence on external capital, technology, and processing capacity.

Processing offers a way to capture more value, but it requires more than raw material inputs. Among the key elements needed are knowledge, technology, and talent—as well as capital and infrastructure for water and power—and not all extraction countries can procure these easily. As a result, some countries with less dominant extraction sectors—such as Malaysia, Morocco, and the Gulf countries—are emerging as processing hubs because they can build on existing advantages and close relationships with the Industrial Five to play an important role in supply chain diversification.

Strategic Imperatives for Business Leaders and Policymakers

The critical minerals landscape is unlikely to shift fundamentally anytime soon. For business leaders and policymakers alike, concentration and scarcity risks, along with active government involvement, will form the baseline for the future. This situation calls for agility and attention, as geopolitical dynamics are likely to shape the supply and demand equation.

The best response may vary by mineral, corporate nationality, footprint, and position in the value chain. Business leaders and policymakers can consider three moves each, and the biggest opportunities lie where these moves overlap: in collaboration. (See Exhibit 6.)

Actions for Business Leaders

Get full transparency, then plan your response. Understanding an organization’s relationship to the critical minerals value chain is not simply a matter of identifying origin. It also means mapping ownership and control across suppliers and processing nodes to enable demand mapping across a range of scenarios.

Reinvent the value chain and business model. Achieving true supplier diversification entails looking beyond geography, because many supposedly alternative sourcing options remain tied to the same state or have financing connections with it. Effective supply diversification calls for substitution, product mix changes, recycling, or dual-material flexibility. Each of these approaches offers an opportunity to reshape the value chain on an organization’s own terms, capturing upsides in both cost and reliability.

Build long-term partnerships and ecosystems. Partnerships provide opportunities to secure direct access to critical mineral supplies through approaches such as co-investment and equity stakes. In situations where securing supply is difficult, it’s wise to consider partnering with other businesses and with governments to secure long-term access without carrying the full cost or risk burden. Partnerships with leading firms and government incentives may also be critical for recycling as it scales.

Example Business Leader Action. A leading OEM sought to shape its EV platform architecture to address its electrical engines’ high dependence on REEs. The company adopted a forward-thinking approach to engineering the drivetrain setup, designing geometry, space, and anchor points to enable seamless swapping-in of REE-free motors once they reach technical maturity.

Actions for Policymakers

Understand your strengths and map your dependencies. Understanding economic strengths and dependencies is beneficial for policymakers, just as it is for business leaders. Strengths may include reserves, processing capacity, technology, infrastructure, and market size—all of which can be leveraged in partnerships, or in industrial policy. Dependencies include exposure to critical minerals across the economy.

Build a bespoke national strategy. Policymakers can consider tailoring their approach in light of circumstances and national priorities. Existing playbooks can provide useful insights. Considering priorities across minerals, sectors, and partners can help policymakers determine what they should secure domestically, what they can source from allies, and what they must accept as a dependency. No single strategy fits all circumstances, and the right mix of tools is important.

Build partnerships and ecosystems. Policymakers can discern the potential benefits of collaboration through partnerships and ecosystems. Pooling demand and infrastructure with other countries can be advantageous in negotiations. Similarly, targeted incentives can help attract foreign investment and expertise, bolstering domestic capacity where either or both are lacking. Finally, public-private partnerships can mobilize private sector action by enabling risk-sharing and by supporting the business case of key projects.

Example Policymaker Action. An African government aimed to reshape its critical minerals strategy to capture more value. Realizing that imposing strict processing requirements would reduce upstream mining activities and risk unintentionally destroying value, the country defined a long-term roadmap that would first boost mining before increasing the share of domestic processing and activities further downstream.

Conclusion

Critical minerals are increasingly interwoven with nearly every industry and sector of the modern economy. As geopolitical competition intensifies and governments deploy policy tools to secure supply and to shape the global market, interconnected value chains will face increasing tension. China’s leading position across extraction, processing, and manufacturing is compelling a strategic response from other countries. Business leaders and policymakers alike can take action—but in both cases, understanding the geopolitical realities is essential to success.

The authors thank Eunice Kim, Kyle Kang, Matheus Neugebauer Motta, and Sara Eberhart for their contributions to this article.