China's Indelible Footprint in the Essential Minerals Market - Analysis

The International Energy Agency's (IEA) Global Critical Minerals Outlook 2025, published in May 2025, paints an alarming picture of the critical minerals market. While demand is skyrocketing, driven by the energy transition, investment and supply diversification are failing to keep pace, leaving the world exposed to a worrying concentration of power, particularly in China's hands.

The IEA report, its most comprehensive assessment yet of mineral supply and demand and supply chain vulnerabilities, comes at a time of strong market recovery after two years of price declines and geopolitical upheavals. Governments, increasingly aware of the strategic importance of these minerals, now consider them a matter of national security.

Rising Demand and the Paradox of Falling Prices

In 2024, demand for key energy sector minerals—such as copper, lithium, nickel, graphite, and rare earths—saw a significant increase, driven in particular by electric vehicles, storage systems, renewable energy, and distribution grids. Lithium demand grew by almost 30%, while nickel, cobalt, graphite, and rare earths increased by 6-8%. The energy sector accounted for 85% of the demand growth for battery metals.

Yet, despite this surge in demand, mineral prices continued to fall in 2024. This apparent paradox is due to a massive increase in supply, primarily driven by China, Indonesia, and the Democratic Republic of Congo (DRC). It's crucial to note that both Indonesia and the DRC benefit from substantial Chinese investments in their mining sectors. This dynamic saw lithium prices drop by over 80%, and graphite, cobalt, and nickel prices decline by 10-20%.

The low prices, in turn, curbed investment. In 2024, investment spending increased by only 5%, a sharp slowdown from 14% in 2023. This situation creates a vicious cycle: low prices discourage investment, which in turn compromises the supply diversification needed to reduce reliance on a few key players.

Supply Chain Concentration: China's Predominant Role

One of the most critical aspects highlighted by the IEA report is the persistent and growing concentration of mineral supply chains, both in extraction and, to an even greater extent, in refining. This concentration is expected to remain a significant problem for the next decade.

China is the dominant refiner for almost all energy minerals, both geographically and in terms of ownership. This is evident through its substantial investments in nickel refining operations in Indonesia. This supremacy in refining, the crucial stage that transforms raw minerals into usable materials, gives China enormous leverage over the entire global supply chain.

Even more concerning is its control over new battery chemistries. Lithium iron phosphate (LFP) batteries, which make up almost half of the global electric car market (up from 10% in 2020), are a striking example: China controls 98% of LFP cathode material production and dominates the downstream supply chain for sodium-ion chemistries. This allows it to dictate terms and influence the availability and costs of essential technologies for the energy transition.

Export Controls and Policy Interventions: A Geopolitical Game

Export controls and national policy interventions are proliferating, adding further risks to mineral supply chains. China, in particular, has introduced export control restrictions or bans on various minerals since July 2023, including gallium, germanium, tungsten, antimony, rare earths, and LFP technologies. This not only demonstrates its ability to influence the market but also highlights its willingness to use this leverage for strategic purposes. The DRC, too, announced a temporary four-month suspension of cobalt exports in February 2025, albeit due to falling prices.

On the other hand, the United States has launched an investigation under Section 232 of the 1962 Trade Expansion Act into processed critical minerals. This investigation could lead to tariffs, import restrictions, and other security and industrial policy measures in an attempt to reduce dependence and bolster its national security.

Diversification Pathways: An Uphill Battle Requiring Collaboration

Diversifying mineral supply chains is a strategic imperative, but the IEA 2025 report emphasizes that it will require significant policy support, as market challenges and interconnections within mineral supply chain segments hinder existing projects. Relevant policies include market-based mechanisms, international partnerships, and support for new technologies.

The G7 Critical Minerals Action Plan, published on June 17, 2025, and endorsed by Australia, India, and the Republic of Korea, focuses on each of these areas. This plan builds on the G7 Five-Point Plan for Critical Mineral Security from 2023, which aims to forecast long-term supply and demand, develop new mining and refining projects, support recycling capacities, promote innovation, and coordinate short-term supply disruptions.

Market Challenges and Market-Based Mechanisms

Numerous market-related challenges hinder mineral supply chain diversification, including high capital costs for projects outside the main producing country (up to 50% higher than in China) and price volatility, which deters private sector investment.

To overcome these challenges, market-based mechanisms that ensure economic sustainability and profitability are necessary. These include:

• Price stabilization measures: Through contracts for difference or floor prices set by a government or intermediary. This model, already used in renewable energy markets, aims to reduce investment risk. Price transparency and the consideration of labor and environmental costs will be crucial for their implementation.

• Volume assurance mechanisms: Guaranteed demand through off-take agreements (government purchases, private sector off-takes, or incentives) can support producer profitability. Relevant tools include recommendations from the U.S. Strategic and Critical Materials Board, demand aggregation for group purchasing, and Title VII of the Defense Production Act, which allows voluntary agreements between the federal government and the private sector to share information and accelerate supply.

• Incentives for downstream companies: To encourage long-term agreements that support diversified production sources.

• Standards-based markets: Mining or refining projects that meet certain sustainability and traceability standards could be eligible for specific market access policies. The G7 Action Plan envisages a "roadmap to promote standards-based markets for critical minerals" by the end of 2025, defining criteria and minimum thresholds, including traceability standards.

International Partnerships: An Inescapable Necessity

Global collaboration is crucial for diversifying mineral supply chains. This can occur through:

• Leveraging international partners' capabilities: Sharing mineral-specific information regarding each segment's capacities and coordinating to ensure that one partner's raw materials can be used in a later stage of the supply chain through specification coordination.

• Pooling and supporting investments: To de-risk and support priority projects. The G7 will encourage multilateral development banks and private sector funders to support standards-based critical mineral projects.

• Coordinating market-based mechanisms: Building on the comprehensive reporting of non-market policies and practices, such as that provided by the U.S. and Norwegian governments. The ongoing U.S. Section 232 investigation could lead to solutions like tariff-rate quotas or product exclusions where specific origin requirements are met.

• Coordinating the development of standards-based markets and traceability systems: To obtain data on a product's origin, ownership (including chain of custody), and physical evolution, contributing to market access programs and compliance with forced labor tariffs.

• Supporting capacity building and responsible mining: In emerging markets and mineral-rich developing countries, through initiatives like the World Bank's RISE (Resilient and Inclusive Supply Chain Enhancement) partnership and the U.S. State Department's Energy and Minerals Governance Program (EMGP).

• Supporting the development and implementation of new technologies: In the mining, refining, and recycling sectors.

Technological Innovation: A Driver for Diversification

Supply-side technological innovations are essential for driving diversification by increasing supply volumes, improving energy and operational efficiency, and reducing environmental impact.

• Direct Lithium Extraction (DLE) technology: Enables direct extraction of lithium from existing brines, geothermal, and oilfield brines, increasing recovery rates and reducing energy costs and extraction times. Scaling up DLE-based production has the potential to boost lithium output in North America and Europe, reducing reliance on current concentrated sources.

• Mine waste reprocessing: Mine waste, including materials like waste rock, tailings, and mine water generated during extraction and processing, can represent an important source of secondary mineral recovery, particularly for small byproduct minerals like gallium (an aluminum and zinc byproduct), germanium (zinc), or indium (from zinc ore processing). The U.S. Geological Survey is developing a National Inventory of Legacy Mine Sites to aid in identifying the resource potential of mine waste.

• New synthetic graphite solutions: Several companies in Norway, France, and the United States are implementing new solutions that reduce energy consumption and processing times for synthetic graphite production, a sector currently dominated by China.

• Advanced recycling technologies: Can produce important sources of mineral raw materials through secondary production. These include:

  • Advanced sorting technologies: Such as X-ray fluorescence and laser-induced breakdown spectroscopy, enabling precise separation of critical minerals from electronic waste.

  • New recovery techniques: Like plasma arc recycling, which harnesses intense heat to recover metals from mineral resources and waste streams.

• Artificial intelligence (AI): Could play a significant role in improving resource discovery and reserve mapping, as well as enhancing the efficiency of mining operations and processing through automation and data application.

Conclusion: China Continues to Call the Shots

The IEA's Global Critical Minerals Outlook 2025 issues a clear warning: global dependence on China for critical minerals, particularly in refining and new battery technologies, represents a significant strategic vulnerability. While there's growing recognition of the problem and initiatives like the G7 Action Plan are underway to promote diversification, the path ahead is long and complex.

China's power, built on its refining dominance, substantial investments in other producing countries, and growing technological influence in new battery chemistries, positions it uniquely to dictate market conditions. The rest of the world's ability to develop resilient and diversified supply chains will depend on robust international collaboration, targeted investments in innovative technologies, and the implementation of market mechanisms that reduce volatility and incentivize new production sources.

Without coordinated and decisive action, the world will remain vulnerable to the decisions of a single actor, with potential repercussions for the energy transition, economic security, and global geopolitical stability.