For over 100 years, petroleum corporations have constructed an extensive system for extracting, processing, and distributing their goods globally. Establishing a less carbon-intensive alternative poses a fresh array of difficulties. China has been successfully navigating this multifaceted problem for the last ten years or so, establishing itself as the preeminent force in the production of ‘critical minerals’, the materials that are fundamental to devices such as batteries for electric vehicles, solar cells, and magnets in wind turbines.
If nations around the globe wish to contest China’s unrivaled superiority in these green technologies, they must accelerate their efforts substantially. This endeavor has become even more pressing as China has begun to restrict the export of certain critical minerals, especially those rare earth metals that are indispensable in the defense and energy sectors. In response to moves to decrease the reliance of nations on foreign imports, measures are being considered for possible imposition of tariffs on these crucial minerals.
‘Critical minerals’ is a term that refers to resources deemed essential for a nation’s industrial and military capacities. The United States and European Union consider approximately 50 metallic elements and minerals as critical. These include lithium, graphite, cobalt, manganese, and rare earths, all unique in their chemical makeup rendering them critical for the manufacturing of certain electronic, magnetic, and optical goods.
The predominant reason that these minerals are categorized as critical is their central role in constructing the infrastructure aimed at decreasing carbon emissions causing climate change. They also find use in semiconductors utilized for civil and military communications. Though many of these indispensable minerals occur in abundant amounts all over the world in their unprocessed form, the processes of extraction and refinement for their usable forms can be complicated. These processes are also energy-dense and can be a source of pollution.
Even for copper and other plentiful metals, the enormous growth in demand signals that supplies may not keep pace. In 2023, for the first time, the European Union declared copper and nickel to be critical raw materials, despite their ample availability in many parts of the world. The intent is to thwart reliance on supplies from a solitary nation since this can expose companies to vulnerability when that country’s industrial production is upset by unforeseen circumstances such as pandemics, power shortages, or social instability.
In the case of China, an already tense relation with the West bears consideration, and this is particularly relevant in the present climate where these enduring frictions are intensifying into a deeper trade war. This war is marked by retaliatory tariffs and stricter export restrictions. In December, China issued a ban on exporting particular elements to the West citing their national security was at risk, after their access to specific delicate technologies was curtailed.
This new trade policy is foreseen to surge the prices for some manufacturers of electronics and optical goods. Furthermore, China enforced export restrictions on several specialized metals employed in fields such as electronics, aviation, and defense. This led to the substantial increase in prices of related products. Within the first quarter of the year, seven additional rare earths were added to China’s export control registry.
China met the increasing local demand for industrial commodities by making strong financial commitments to foreign mining resources and came to control many industrial commodities and their unusual derivatives. Presently, its global mined or refined production stands as the greatest creator of 20 indispensable raw resources. For instance, nearly all the mined and refined production of dysprosium, a rare earth element used in lighting and lasers, is now controlled by China.
Western countries are formulating strategies aimed at decreasing their dependency on Chinese materials and at the same time escalating the domestic production and refining of these critical resources. An investigation into the critical minerals supply chain has also been launched to consider whether tariffs should be levied on imports. These nations are attempting to negotiate deals and form investment partnerships with countries that produce these valuable resources to secure their supply.
Nonetheless, China’s early and established presence in many of those countries gives it a significant tactical advantage. As an example, most of the cobalt mines in the Democratic Republic of Congo are either owned or managed by Chinese corporations. China is forging deeper ties with African states, which are expected to be among the top global producers of this metal in the near future.