The countries that dominate the critical material supply chains

Cobalt: The Democratic Republic of Congo and China lead the charge

Cobalt is crucial for the production of lithium-ion batteries, which power electric vehicles (EVs) and other renewable energy technologies. The Democratic Republic of Congo (DRC) dominates cobalt production, accounting for 73% of global mine output. This central African nation also holds 57% of the world’s cobalt reserves, highlighting its significant role in the global supply chain.

However, the processing of cobalt is dominated by China, which handles 74% of the world’s cobalt refining. This is a critical link in the supply chain because processing is where raw cobalt is turned into battery-ready material. Other players in processing include Finland (10%) and Canada (4%). This imbalance between production and processing highlights the vulnerabilities in the cobalt supply chain, particularly the reliance on China for refining.

Lithium: Australia and Chile compete, but China dominates processing

Lithium is another key element in battery production, particularly for EVs. Australia is the largest producer of lithium, contributing 51% of global mine production, while Chile follows with 26%. However, Chile holds the largest reserves, with 34% of the world’s lithium reserves, followed by Australia with 22%.

Despite being a minor player in terms of production, China once again dominates the processing of lithium, with 65% of global refining capacity. This is crucial as the raw lithium needs to be processed into lithium carbonate or lithium hydroxide for use in batteries. Chile is the second-largest processor, but far behind China, handling only 29% of global lithium refining.

Natural graphite: China’s absolute control

China’s dominance extends to natural graphite, where it controls 72% of global production and a staggering 100% of processing capacity. This means all of the world’s graphite destined for batteries, lubricants, and other industrial applications must pass through Chinese processing facilities. In terms of reserves, China also leads with 28%, followed closely by Brazil, which holds 26% of global reserves.

Mozambique and Madagascar are emerging players in graphite production, contributing 10% and 8% respectively. However, they lack the processing infrastructure to compete with China, highlighting the need for investment in processing facilities outside of China to diversify supply chains.

Rare earth elements: China’s stranglehold

Rare earth elements (REEs) are critical for a range of advanced technologies, including wind turbines, electric vehicles, and military equipment. China again emerges as the dominant player, responsible for 70% of global rare earth production and 90% of processing. The United States and Australia contribute to production, but their shares are small, at 14% and 6%, respectively.

China’s dominance in rare earth processing is a particular concern for supply chain stability. Processing rare earths is a complex and environmentally challenging task, and China’s experience in this field gives it a significant advantage over other nations. The U.S., which holds 14% of rare earth production capacity, relies heavily on China for processing, as do other countries with REE resources like Australia and Vietnam.

The risks of concentration in mineral supply chains

The overwhelming dominance of a few countries in both the production and processing of these strategic minerals presents several risks. First, the reliance on China for processing means that any disruption in Chinese production—whether due to geopolitical tensions, environmental regulations, or trade restrictions—could have far-reaching consequences for the global supply chain.

Second, the concentration of mineral production in countries like the DRC (for cobalt) and China (for graphite and rare earths) raises concerns about ethical sourcing and environmental impacts. The DRC, for example, has been criticised for poor labor practices in its cobalt mines, including the use of child labor. Additionally, the environmental toll of mining in these countries often goes unchecked, further complicating the ethical dimensions of the supply chain.

Efforts to diversify the supply chain

To mitigate these risks, several countries and companies are investing in diversifying the global supply chain for strategic minerals. The U.S., for example, has ramped up efforts to develop domestic production and processing capabilities. In 2023, three recycling facilities for strategic minerals became operational in the U.S., aimed at reducing reliance on foreign imports.

Countries like Australia and Canada are also ramping up their efforts in lithium, cobalt, and rare earth production, while nations such as Brazil and Mozambique have begun to exploit their graphite reserves. However, despite these efforts, the overwhelming dominance of China, particularly in processing, remains a significant challenge.

Conclusion: China’s strategic dominance

China’s overwhelming control of mineral processing makes it the linchpin of the global supply chain for critical minerals. While other nations, particularly in Africa, South America, and Australia, play vital roles in raw mineral production, the refining stage remains heavily concentrated in China. To secure the supply of these minerals critical for the energy transition, global efforts to diversify supply chains and invest in alternative sources of production and processing are essential. Without significant changes, the world remains vulnerable to disruptions in the strategic mineral supply chain, particularly in the face of geopolitical tensions and growing demand for renewable technologies.

Source: USGS & IEA