Critical Minerals Cold War: Lithium & Rare Earths Competition

The fierce competition for critical minerals is reshaping global alliances, trade flows, and industrial priorities. As nations scramble to secure access to these essential resources, the world finds itself at a pivotal crossroads—one where the balance of technological power, economic resilience, and even military readiness hinges on the ability to control the minerals that fuel our modern age.

The Strategic Importance of Critical Minerals

Critical minerals are the backbone of modern economies and national security. These elements—vital for key industries, difficult to substitute, and vulnerable to supply disruptions—are far more than commodities. Their strategic value lies in their ability to drive innovation, enable defense capabilities, and power the transition to a low-carbon future. The risk of supply chain shocks, whether from geopolitical tensions or market concentration, makes understanding and securing these resources a top priority for governments worldwide.

Defining the Contested Resources: Lithium, REEs, Cobalt

At the heart of this global contest are minerals like lithium, rare earth elements (REEs), and cobalt. Lithium, often called “white gold,” is indispensable for rechargeable batteries in electric vehicles (EVs), smartphones, and grid-scale energy storage. REEs—a group of seventeen metals including neodymium and dysprosium—are crucial for powerful magnets in EV motors, wind turbines, and advanced defense systems. Despite their name, REEs are not especially rare, but extracting and refining them is complex and environmentally taxing.

Cobalt, mainly sourced from the Democratic Republic of Congo, is essential for battery stability and high-performance alloys used in jet engines. Other minerals, such as graphite (for battery anodes), nickel, manganese, and platinum group metals, also play critical roles in clean energy and high-tech applications. The geographic concentration of these resources adds layers of risk and complexity to global supply chains.

Fueling the Future: Critical Minerals in Green Tech and Defense

The push for green technology and advanced defense systems has sent demand for critical minerals soaring. Electric vehicles, wind turbines, and solar panels all require substantial amounts of these materials. For example, an average EV battery contains several kilograms of lithium, cobalt, and nickel, while wind turbines rely on tons of REEs for their generators. The International Energy Agency predicts that demand for minerals like lithium could surge over 40-fold by 2040 if climate goals are to be met.

Defense applications are equally reliant on these minerals. Fighter jets, precision-guided missiles, drones, and advanced communication systems all depend on unique properties—magnetism, heat resistance, conductivity—found only in specific critical minerals. Any disruption in supply could cripple defense manufacturing and erode technological superiority, underscoring the dual-use nature of these resources and intensifying the global race for secure access.

China’s Ascendancy in the Critical Minerals Arena

China’s dominance in critical minerals is the result of decades of strategic planning and industrial policy. By investing heavily in mining, processing, and refining, China has built a near-monopoly in several key markets. State-backed companies have aggressively acquired overseas assets and developed advanced processing technologies, often absorbing environmental costs that deterred competitors. This long-term vision has positioned China as the gatekeeper for many of the world’s most important minerals.

Strategic Investments and Industrial Policy: China’s Path to Dominance

Since the late 20th century, China has treated rare earths and other critical minerals as strategic assets. Policies like “Made in China 2025” prioritized securing raw materials for high-tech industries. Chinese firms, supported by the state, have acquired mining operations across Africa, South America, and Asia, ensuring direct access to raw ores. At the same time, China invested in mastering the complex processing techniques that turn these ores into high-value products.

This vertical integration—from mine to finished component—allowed China to outcompete rivals and build economies of scale. Many Western countries, seeking lower costs, offshored their own processing, inadvertently ceding control to Beijing. Today, China’s grip on the critical minerals supply chain is formidable and difficult to dislodge.

The Processing Powerhouse: China’s Control over REE Refining

China’s dominance is most pronounced in rare earth processing. While REE ores exist in the US, Australia, and Europe, over 80% of global refining capacity is in China. Separating and purifying these elements is technically demanding and often polluting, but China’s established infrastructure and expertise have created high barriers for new entrants. The 2010 export restrictions to Japan exposed the world’s vulnerability, and rebuilding non-Chinese supply chains remains a slow, costly process.

China’s control extends beyond REEs to minerals like graphite, cobalt, and lithium, further amplifying its leverage over global technology and defense industries.

Western Nations Confronting Mineral Supply Vulnerabilities

Growing awareness of dependence on potentially adversarial suppliers has jolted Western nations into action. Years of prioritizing cost efficiency led to offshoring mining and processing, creating fragile supply chains now recognized as strategic liabilities. The COVID-19 pandemic and China’s assertive use of economic power have exposed these risks, prompting urgent efforts to map vulnerabilities and build more resilient systems.

Mapping Western Dependencies and Supply Chain Risks

Detailed supply chain mapping has revealed alarming reliance on China for processed REEs, permanent magnets, battery-grade graphite, and key forms of lithium and cobalt. For example, the US imports the majority of its rare earth compounds from China. These dependencies expose industries to politically motivated disruptions, price volatility, and loss of manufacturing know-how. Past export restrictions and recent controls on minerals like gallium and germanium have only heightened these concerns, threatening sectors from automotive to defense.

United States’ Strategy: Securing Domestic Supply and Defense Needs

The US response is multi-faceted. Legislation like the Inflation Reduction Act and Bipartisan Infrastructure Law provides incentives for domestic mining, processing, and recycling. The Department of Defense has invoked the Defense Production Act to boost production of rare earths and permanent magnets, aiming to eliminate reliance on Chinese suppliers for military systems by 2027.

Efforts include reviving the Mountain Pass rare earth mine and building new processing facilities. However, challenges remain: lengthy permitting, environmental concerns, competition from low-cost producers, and workforce shortages. The US also emphasizes “friend-shoring,” working with allies like Canada and Australia to diversify supply chains.

The EU’s Critical Raw Materials Act: Building European Resilience

The European Union’s Critical Raw Materials Act sets ambitious targets for 2030: extract at least 10% of strategic raw materials domestically, process 40%, and recycle 15%. The Act aims to ensure no more than 65% of any single material comes from one country. Measures include streamlining permits, supporting innovation, and forging partnerships with resource-rich nations. The EU faces hurdles such as limited domestic resources, public resistance to new mining, and high energy costs, but is determined to reduce its vulnerabilities.

Building Alternative Supply Chains: Global Initiatives and Key Players

International collaboration is central to building resilient supply chains. The Minerals Security Partnership, led by the US and including allies like Australia, Canada, and Japan, seeks to catalyze investment in responsible mining and processing projects. Australia and Canada, with rich mineral reserves and established industries, are pivotal. Companies like Lynas Rare Earths and a host of new entrants are working to scale up production, though challenging China’s dominance will take time and sustained investment.

Geopolitical Flashpoints in the Global Mineral Scramble

The race for critical minerals is fueling geopolitical tensions and reshaping international relations. Regions with significant deposits—often unstable or contested—are becoming battlegrounds for influence among major powers, with far-reaching implications for security and economic development.

Ukraine: Mineral Riches Amidst Conflict and Reconstruction

Ukraine holds vast, largely untapped reserves of lithium, titanium, graphite, manganese, and potentially rare earths. The ongoing conflict has halted development, with many mineral-rich areas under Russian occupation or affected by fighting. The future exploitation of these resources is now tied to the outcome of the war and Ukraine’s reconstruction. Western nations and China are both eyeing opportunities to participate in rebuilding Ukraine’s mineral sector, making control over these assets a strategic priority. The fate of Ukraine’s minerals could shape not only its own recovery but also the broader balance of power in Europe. The significance of these resources is explored in The Mineral Wars.

The Lithium Triangle: Strategic Competition in South America

The “Lithium Triangle”—Argentina, Bolivia, and Chile—contains over half the world’s known lithium reserves. Chinese companies have aggressively invested in the region, securing offtake agreements and equity stakes that give them a strong foothold in the upstream supply chain. Western governments and firms are now racing to increase their presence, but face political complexities, evolving national policies, and growing environmental and indigenous rights concerns. Bolivia’s state-led approach, Chile’s new national lithium strategy, and Argentina’s openness to foreign investment all shape the competitive landscape.

Central Asia: Emerging Battleground for Rare Earth Elements

Central Asian countries like Kazakhstan and Uzbekistan are gaining attention for their rare earth and critical mineral potential. Strategically located between Russia and China, the region is attracting interest from the US, EU, and China, all seeking to diversify supply. While much of the mineral wealth remains underexplored, successful development could offer alternatives to Chinese dominance. However, investment is complicated by political risks, infrastructure gaps, and the influence of neighboring powers. The evolving contest in Central Asia is part of the broader new Great Game over rare earths.

African Resources: Cobalt, China’s Influence, and Ethical Concerns

Africa is rich in critical minerals, with the Democratic Republic of Congo producing about 70% of global cobalt. Chinese companies dominate the DRC’s cobalt sector, controlling much of the mining and nearly all local processing. This dominance raises ethical concerns, especially around artisanal mining, hazardous conditions, and child labor. Western companies are increasingly focused on responsible sourcing and traceability to ensure their supply chains are free from human rights abuses. Other African nations, including Zimbabwe, Mozambique, South Africa, and Zambia, are also attracting investment and geopolitical interest as alternative sources for lithium, graphite, platinum group metals, and copper.

The Weaponization of Mineral Supplies

The concentration of critical mineral production and processing in a handful of countries creates opportunities for geopolitical leverage. Export controls, quotas, and other restrictions can disrupt markets, threaten industries, and escalate tensions, making diversification and resilience more urgent than ever.

China’s Export Controls: Gallium, Germanium, and REE Market Impacts

China has repeatedly used its market power as a geopolitical tool. The 2010 halt of rare earth exports to Japan and the 2023 export controls on gallium and germanium—vital for semiconductors and defense—sent shockwaves through global industries. These moves, often framed as national security measures, are widely seen as responses to Western tech restrictions. Even the threat of further controls keeps markets on edge and accelerates efforts to find alternative sources. The ongoing uncertainty around Ukraine’s rare earth minerals adds another layer of complexity to global supply chains.

Resource Nationalism: Nations Prioritizing Domestic Mineral Access

Resource nationalism is on the rise, with governments seeking greater control over their mineral wealth. Policies range from nationalization and higher taxes to export bans and mandates for domestic processing. Indonesia’s nickel export ban and Mexico’s lithium nationalization are recent examples. While these moves can boost local economies, they also disrupt global supply chains and deter foreign investment, complicating efforts to build stable, diversified sources of critical minerals.

Pathways to Enhanced Mineral Security and Sustainability

Securing critical minerals for the future demands a multi-pronged approach—one that balances supply security, environmental sustainability, and ethical sourcing. No single solution will suffice; instead, a combination of strategies is needed to ensure a stable and responsible flow of these vital resources.

Supply Chain Diversification: Mitigating Single-Source Risks

Reducing reliance on any one country, especially China, is the top priority for many nations. This means investing in new mining and processing projects in stable, friendly countries—often called “friend-shoring.” While developing new supply chains is slow and costly, the long-term benefits of resilience and security outweigh the challenges. The goal is a more balanced, distributed global network, not unrealistic self-sufficiency.

Innovation in Mineral Use: Recycling, Substitution, and New Technologies

Technological advances can ease supply pressures. Building a circular economy—recycling end-of-life batteries, electronics, and wind turbines—creates secondary sources of critical minerals. Research into alternative materials and new battery chemistries, such as sodium-ion batteries or rare earth–free magnets, could reduce dependence on the most vulnerable minerals. Improving efficiency and developing cleaner extraction technologies are also key to a more sustainable future.

Strategic Stockpiling: A Buffer Against Supply Disruptions

Maintaining government or industry stockpiles provides a buffer against sudden shocks. The US National Defense Stockpile and similar programs in Japan and the EU offer temporary relief during crises. While not a cure-all, strategic reserves buy time to secure alternative supplies and adjust demand, forming one part of a broader risk management strategy.

Forging Alliances: International Cooperation for Resource Stability

Global challenges require global solutions. Alliances like the Minerals Security Partnership help coordinate investment, share intelligence, and set standards for responsible mining and processing. Bilateral agreements with resource-rich countries foster stable trade and encourage ethical practices. Even dialogue with competitors can promote transparency and reduce the risk of disruptive actions. Ultimately, a collaborative international framework is essential for navigating the complexities of the critical minerals era and ensuring long-term resource stability.