Oil companies spent more than a century developing a vast industrial network to extract, refine and deliver their product to customers around the world. Sourcing the materials needed to build an alternative, less carbon-intensive economy presents a whole new set of challenges.
China has been tackling these successfully for more than a decade, making it the undisputed leader in the “critical minerals” used in equipment such as electric vehicle batteries, solar panels and wind-turbine magnets.
If other nations are going to have a chance of challenging its dominance in these clean technologies, they need to catch up fast. The race has taken on greater urgency now that China is curbing exports of several critical minerals in response to U.S. President Donald Trump’s trade tariffs.
What are critical minerals?
Nations have long sought to secure supplies of materials they deem vital to their industrial and military capabilities. About 50 metallic elements and minerals have met those criteria in the U.S. and European Union, including lithium, graphite, cobalt, manganese and rare earths — elements with unique chemical behaviors that make them indispensable to the manufacture of some electrical, electronic, magnetic and optical products. Most critical minerals were chosen for their role in building the infrastructure required to reduce carbon emissions blamed for climate change, a mission that’s backed by hundreds of billions of dollars in subsidies and tax breaks. Some are also used in semiconductors for civil and military communications.
Why is sourcing them a challenge?
While many critical minerals can be found in a raw state in large quantities across the globe, extracting and refining them into a usable form can be technically complex, energy intensive and polluting. China has come to dominate the value chain for many of these products. Even in the case of more abundant metals such as copper, massive demand growth means there might not be enough to go around. In 2023, the EU categorized copper and nickel as critical raw materials for the first time, even though there are lots of places where they can be found.
Why is relying on China a problem for western nations?
Manufacturers try to avoid over-dependence on supplies from any single country because it leaves them exposed when that nation’s industrial output is disrupted by things like power shortages, epidemics or social unrest.
With China, there’s also a strained relationship with the U.S. to consider, especially now that longstanding tensions are spiraling under Trump into a deeper trade war involving punitive tariffs and tightening export restrictions.
China banned the export of antimony, gallium and germanium to the U.S. in December, citing national security concerns, after Washington restricted China’s access to some sensitive technologies. The move is likely to raise costs for some U.S. manufacturers of electronic and optical equipment. Beijing also placed tighter conditions of sales of graphite, an ingredient in EV batteries. In early February, in response to Trump’s latest tariffs, China added export controls on tungsten, bismuth and other niche metals used in electronics, aviation and defense, sending prices of some of those products soaring.
How did China get so dominant?
As early as 1992, Chinese leader Deng Xiaoping was highlighting his country’s potential to lead the world in critical minerals, saying “The Middle East has oil. China has rare earths.” As its economic growth accelerated, Chinese demand for industrial commodities began to far outstrip local reserves. It responded with heavy investments in mining assets overseas and came gradually to dominate the refining and processing of many industrial commodities, as well as a host of obscure byproducts. As China stepped in, Western companies withdrew, happy to outsource the production.
Today, China is the leading producer of 20 critical raw materials, as measured by its share of global mined or refined production. In the case of the rare earth element dysprosium, used in lighting and lasers, China is responsible for 84% of mined supply and 100% of refined production, according to an EU analysis. It’s also the largest producer of refined forms of cobalt and nickel, and Chinese companies have been investing heavily in cobalt and nickel mines in countries such as Congo and Indonesia.
What are China’s economic rivals doing about it?
Former U.S. President Joe Biden’s Inflation Reduction Act of 2022 aimed to help the U.S. meet its climate goals through job-creating investments in renewables and EVs and ease reliance on unreliable or hostile overseas suppliers.
While Biden’s successor Trump has disparaged his climate policies and ordered federal agencies to stop disbursing IRA funds, a complete repeal of the legislation appears unlikely. Republican lawmakers whose districts and states are benefiting from investments spurred by the IRA have pressed the president to maintain its provisions.
In March, Trump took the Biden administration’s effort to reduce U.S. reliance on minerals from China a step further, invoking emergency powers to boost domestic production and processing of the materials.
In the EU, a Critical Raw Materials Act aims to ease financing and permitting for new mining and refining projects at home and strike trade alliances to reduce Europe’s dependence on Chinese suppliers. The bloc is also pushing through a Clean Industrial Deal that will include a mechanism enabling companies in the region to pool their demand for critical materials.
China’s rivals have been trying to strike supply deals and investment partnerships with producing nations. However, China’s established position in many of those countries gives it an early advantage. For example, more than half of the cobalt mines in the Democratic Republic of Congo are owned or controlled by Chinese companies. Beijing is consolidating relationships with African nations that are set to be among the world’s biggest producers of the metal by the end of the decade.
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Mark Burton, Bloomberg News
--With assistance from Jack Ryan and John Ainger.
©2025 Bloomberg L.P.
