Critical Minerals: What are They? And Why Do They Matter?

Critical minerals are present on the nodules of major minerals, holding immense industrial and manufacturing potential for companies, countries, and economies alike. The contemporary discourse on critical minerals is highly dependent on the prevailing socio-economic developments and disparities, largely defined by technological advancements.

Illustration by The Geostrata

Though there may be different classifications of which mineral is critical, nevertheless, they are vital not only for energy and economic security but also for larger national interests and comprehensive national power. 

WHAT ARE THEY?

The minerals are labeled as critical because of the highly disruptive nature of their exploration, extraction, and exploitation.

Some are present in low concentrations as byproducts of major mineral groups, while others, like copper, have highly concentrated downstream processing stages, providing strategic levers to countries like China.

Rare earth elements are a further subset of critical minerals, comprising 15 lanthanides as well as scandium and yttrium. However, their deposits are dispersed, poorly concentrated, and economically unviable, complicating their extraction.  

WHY DO THEY MATTER?

Powering the 4th Industrial Revolution, minerals like cobalt, graphite, nickel, etc, hold the key to sustainability, easing energy transition from fossil fuels to renewable sources. These minerals are basically running our digitally powered world today - the vast electricity network and fiber optical cables, the AI advancements, robotics, and semiconductors.

The twin transition in our world today- green energy adoption for climate change and digitalisation is being powered by these minerals. Massive resources are required for the newer and advanced technologies; for instance, the construction of a wind farm or an electric car requires 7 different types of minerals, in stark contrast to a conventional gas power plant or car. 

Quantum computing equipment is dependent on critical minerals. A few examples include - tellurium for solar panels, silicon for semiconductors,  dysprosium used in  magnets for  wind turbines, lithium ion batteries for electric vehicles etc. 

The rapid rate of adoption of energy technologies across the world underscores the rising demand for these minerals, which is expected to keep increasing in all scenarios. By 2040, it is estimated that demand for cobalt and rare earth elements will increase by 50-60% while lithium is expected to register a 5-fold growth in the same period. Increasing demand for copper in the electrification of grids, among other sectors, is also expected to grow by 30% by 2040. 

As is evident, critical minerals are vital for sustaining technological advancements in the energy sector and, by extension, the economic growth that follows. They are at the fulcrum of green and clean energy for climate adaptation, economic prosperity, and energy security, lending a strategic leverage to those who control it. 

THE MINERAL GEOPOLITICS

The tech geopolitics of today is closely enmeshed with the mineral geopolitics. Geoeconomic planning is intertwined with crucial dimensions of national security.  As has been observed, China controls over 40% of the global capacity for smelting and refining copper, lithium, rare earth, and cobalt.

Some experts believe that resource geopolitics can also be found in the Russia-Ukraine conflict.

Before the 2022 war, Ukraine was counted amongst the largest suppliers of noble gases like neon (for chipmaking), lithium, and hydrocarbons. These minerals found in the region of Donetsk, Kharkov, and Zaporizhzhia are under Russian control presently. 

Recently, China has restricted the export of these minerals, amplifying risks for everyone in the supply chain. Export controls under dual-use export license rules could be seen in response to the US tariffs. However, this means that key manufacturing in the energy transition would slow down and become more vulnerable to supply shocks. This weaponization of interdependence is not unheard of but has huge implications for the world trade and economy, impacting downstream consumers alike. 

The Democratic Republic of Congo holds 60% of global coltan reserves, while being the largest global producer of cobalt. China has considerable influence over its reserves with significant stakes. The DRC offering the US and European investors access to its resources in exchange for peace is a new development, with significant repercussions for US-China strategic competition.  

The following table highlights the geographic concentrations of refining key materials straining global supply chains as analysed by IEA's Global Critical Minerals Outlook.

Case Study: Copper - 

Refining Countries	Share of Copper refining in 2024	Share of copper refining in 2035
China	44%	49%
Chile	7%	5%
DRC	8%	6%
Rest of the world	41%	41%

This skewed distribution is alarming for global markets and the resilience of supply chains, given the crucial nature of these minerals. It can be concluded that today, the geopolitical trading blocs are coalescing and forming around the imperatives of securing supply chains and maintaining national interests. 

OF SUPPLY CHAINS, CURBS, AND MONOPOLY

Shaping and redrawing international relations and blocs, these minerals are also a flashpoint for conflicts, with the US-China strategic competition being the most crucial one. It is in this context that the recent developments like China plus one, friendshoring, and reshoring should be understood. There has been a growing global consensus on making supply chains more diverse, resilient, secure, and sustainable, hedging the bets against potential large-scale industrial disruption.

Indonesia largely controls the refining and processing market for nickel, while China has a firm grip over other minerals like cobalt, copper, etc. This monopoly comes from low costs of production, which is often energy-intensive and high-emissions oriented. For others, mining and refining capex could be more than 50%, making the sustenance costs unviable and reducing profit margins over a period of time. 

Let's analyse the comparative advantage of Indonesia and China over others in the case of a mineral, Nickel, as per the IEA's Global Critical Minerals Outlook, 2025. 

Refiners	Refining share in 2024	Refining share in 2035
Indonesia	43%	46%
China	31%	33%
Japan	3%	2%
Rest of the world	23%	18%

The markets for these holy grail minerals are only getting concentrated, with diversification as the cornerstone for guaranteeing energy and national security. For instance, the average share of the top three nations that refine and process critical minerals increased from 82% in 2020 to 86% in 2024. Mineral Security Partnership (MSP) is an example of how policymakers have made resilient supply chains a priority. This US-led initiative highlights the importance of global cooperation in securing a clean energy transition.

At present, countries like Australia, Canada, Estonia, Finland, Greece, France, the UK, Japan, Norway, India, South Korea and the European Commission are partnering with the US in this initiative. 

To address the economies of scale and huge scope of demand for these minerals, the member countries have partnered with the private sector, DFIs, development finance institutions, and ECA export credit agencies for synergistic efforts with maximum impact and outcomes. MSFN, Mineral Security Financial Network, as an offshoot of MSP, is a step in this direction. 

Governments across the globe have injected a vigorous impetus into securing supplies of these critical minerals, leveraging public funds, domestic institutional reforms, and strategic partnerships. Europe is ramping up cross-border collaboration and national funds for investment, while North America is leveraging private sector investment by offering incentives.

Rich in critical minerals, Latin America is expected to reach 154 billion USD in mining and refining minerals. Australia is trying to move upwards in the value chain, other than mining activities. The Middle East also recognises the value of these minerals as a key to diversification of its oil-based economies, investing long-term capital in the strategic supply chain. Regulatory reforms, attracting foreign capital, and stimulating private investments are some of the steps taken to ensure supplies of these minerals.

INDIA'S AMBITIONS 

India recently launched a national mission on critical minerals with a robust policy framework for self-reliance in this sector. The major objectives include securing sourcing from domestic and foreign sources, recycling of minerals, and strengthening value chains by investing in research and development, innovation, and skill enhancements. Furthermore, 30 minerals have been identified as critical, with the central government being the sole authority to auction mining leases and licenses.

The Samudrayaan deep ocean mission is also intended to explore polymetallic nodules comprising manganese and copper, among other minerals, to ensure energy security and national interests. This is in line with global efforts to secure supply chains for critical minerals. 

A snapshot of Asia's share in global mining and mineral deposits in 2024, excluding China’s production capacities - 

Countries	Rare earth elements
Myanmar	16.1%
Lao People's Democratic Republic	4.1%
India	1.1%
Rest of Asia	2.1%

CHALLENGES

Arguably, one of the foremost challenges of critical minerals is their viable extraction, refining, and processing. Price fluctuations, for instance, within 20 strategic energy minerals, 75% exhibit greater price volatility than oil. With China solely holding 70% refining market share for 19 out of these 20 energy minerals, geopolitical concerns remain primary considerations. 

Minerals like gallium, germanium and tellurium are extracted during copper, nickel or aluminium ores refining, linking their supply and market dynamics to the output of these minerals. 

The following case study of rare earths points to the highly concentrated markets increasing vulnerabilities to shocks and disruptions, even if the supply of these minerals is manageable as per the Global Critical Minerals Outlook by IEA, 2025.

Markets	Share of rare earths refining in 2024	Expected share of rare earths refining in 2035
China	91%	75%
Malaysia	4%	9%
Rest of the world	10%	3%

SILVER LINING

Global cooperation and collaboration remain the key to diversification of the supply chain, with resource-rich countries and respective capacities for refining leading to synergistic outcomes. Moreover, an emphasis on opportunities linked across the supply chain rather than a segmented approach focusing on a single part of the value chain can help deliver tangible results.

Take, for example, the graphite resources of Madagascar, Mozambique, and Tanzania, constituting about a quarter of the global deposits, and the USA, Japan, and Germany's capabilities to produce graphite anode materials can be effectively utilised for partnerships and collaboration. 

The IEA suggests tapping into market mechanisms to support policy directives for supply chain resilience. Furthermore, scaling up recycling of minerals could also address the pressures on their supply, stabilizing prices even as the demand continues to grow. 

As a new frontier for world energy security, critical minerals provide a strategic heft today to those who control these assets. A geopolitical leverage to shape the outcomes of the global economy, critical minerals are a new form of control in the old playbook of geopolitics. Not just an economic anchor and strategic flashpoint, critical minerals are rewriting the global trade rules. 

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BY ADITI CHOUDHARY

CENTRE FOR CRITICAL AND EMERGING TECHNOLOGIES

TEAM GEOSTRATA

info@thegeostrata.com