Critical Minerals: Contemporary Shortcomings and Global Cooperation

Critical minerals are essential for the production of most modern technologies, renewable energy systems, and defense applications. Examples include cobalt, which is integral in the lithium-ion batteries that power devices like smartphones and electric vehicles. Rare earth elements like neodymium are crucial for the magnets used in wind turbines, enabling efficient electricity generation in renewable energy systems. Currently, China monopolizes the global supply of critical minerals. In order to protect the security of the United States and its allies as well as the western world’s core values of democracy and free trade, a new, China-orthogonal critical mineral supply chain must be forged.

Up until the mid-1980s, the U.S. controlled the world’s critical minerals market, but in response to expanding environmental regulations leading to tight profit margins, the U.S. pivoted towards China’s cheap labor for production. China currently accounts for 60% of the world’s raw exports of critical minerals and 85% of the processing capacity, including 90% of the mined graphite, 67% of neodymium production, and 60% of the processed lithium supply. This clear monopoly creates several contemporary geopolitical tensions.

As critical minerals are ubiquitous in most high-level technologies, and a reduction in global exports would dramatically threaten most economic sectors, China’s dominance in critical minerals has earned it significant leverage. For instance, in response to the 2010 collision between a Chinese fishing boat and a Japanese military vessel in disputed waters, China blocked all exports of rare earth metals (e.g. neodymium, lanthanum) to Japan. Frustrated by several subsequent export restrictions targeted at Western powers, the Obama administration filed a case with the World Trade Organization, which ruled against China in 2015 and forced the dissolution of several rare earth metals blockades. However, China continued the pattern, leveling several similar blows just this past year. For instance, China announced export curbs in August of 2023 for gallium and germanium, which are metals used in semiconductor chips. In October 2023, two weeks after the U.S. updated sections of the CHIPS Act, China retaliated by announcing new export controls on graphite, a common anode material for electric car batteries used by Tesla and Mercedes. Furthermore, in December 2021, China subtly merged its three most prolific rare earths mining and processing firms into one state-owned enterprise, indicating that the Chinese Communist Party may leverage the global critical minerals supply in geopolitical disputes.

Additionally, China has turned to exploiting underdeveloped nations to maintain its critical mineral monopoly. In Myanmar, Chinese state-owned enterprises funded local militias to procure illegitimate mining permits, which led to over $20 million in illegal imports in 2022. In order to capitalize on Myanmar’s dysprosium and terbium reserves, these companies have erected over 2,700 mines in the past five years, caused over $5 billion in environmental damages, and dumped waste into the headwaters of a river that sustains 54 million people. China has also made significant headway in mining operations throughout Africa through Belt and Road Initiative projects. For instance, China currently owns 15 of the 17 cobalt mines in the Democratic Republic of Congo, a nation with intense domestic instability, widespread militia violence, and $2 billion in debt to China. An expansion of China’s “investments” in Africa will likely lead to further exploitative ownership of valuable natural resource reserves in unstable nations.

The Biden administration has recognized this difficult situation and has made seeking independence from China’s critical mineral monopoly a priority. The reinvigorated Quadrilateral Security Dialogue (QUAD) alliance, composed of the U.S., Japan, Australia, and India, has become a vehicle for critical mineral investments and diplomatic action. The Quad Critical Minerals Partnership Act from March, 2022 declares Congress’ resolution that “the United States should reduce reliance on the People’s Republic of China for critical minerals” through investment in mining, production, and refining infrastructure both domestically and in partnership with the Quad nations.

The Quad has already begun taking action: the 2023 Hiroshima Quad Summit established both a Memorandum of Cooperation to govern future trade as well as a new international advisory panel, composed of technological and geopolitical experts to advise future Quad investments in critical minerals. Additionally, the U.S. has already invested $900 million in Arafura, an Australian mining company, to develop neodymium mines in central Australia that are expected to eventually produce an impressive 5% of the global output. Recent discoveries of massive lithium reserves in India could also lead to future Quad collaborations on resource extraction.

The Biden administration’s efforts towards improving critical minerals independence are strong and promising. Two policy proposals for accelerating this divergence are as follows:

1. Promote Greater Cross-Border Exchange of STEM Professionals

To complement U.S.’s raw extraction, the Australian government announced an extra AUS$2 billion investment into building critical mineral processing infrastructure. American material scientists from the Critical Minerals Innovation Hub have significant experience in designing cutting-edge processing technologies and could help optimize Australia’s eventual production capabilities while accelerating development.

Other opportunities for diplomatic STEM exchange include expanding niche, high-level critical minerals manufacturing operations that are pertinent to national security. For instance, REBCO (Rare Earth Barium Copper Oxide) is the backbone of nuclear fusion devices, and while startups across the Quad are currently striving to expand supply, Japan’s Faraday Futures has been churning out REBCO for years. Thus, if Japan were to share its expertise, all Quad nations could collaboratively accelerate development and achieve commercial-scale fusion more rapidly, demonstrating that the exchange of knowledge and science would accelerate technological advances in vital technologies.

2. Incorporate ASEAN into the U.S.’s New Critical Minerals Supply Chain

China has been forging allegiances in ASEAN through its Belt and Road Initiative over the past decade; China provided $18.6 billion to build critical mineral infrastructure in 2022 alone, including nickel mines in Indonesia, barite mining in Laos, and cobalt production in the Philippines. However, these contracts typically trap ASEAN countries in debt and result in China owning the industrial infrastructure, further controlling the supply chain for critical minerals. U.S foreign direct investment would offer an alternative source of investment that guarantees free trade and other democratic values. Thus, this proposal counters the encroachment by China into ASEAN’s technological sector, while utilizing ASEAN’s geographical proximity to the remainder of the Quad alliance.

ASEAN occupies a strategically important geographical nexus between Quad nations and could provide intermediate processing of Australian and Indian raw minerals before sending minerals to higher-level manufacturing facilities in Japan and the U.S. The economic growth opportunities afforded to ASEAN countries could also improve sentiments towards the U.S. in the region. These enriched relations could diffuse sensitive issues in the Indo-Pacific such as Taiwanese independence, thus serving an additional alliance-building purpose.

China’s monopoly on the critical minerals industry must be broken to ensure the U.S.’s national security, the continuous advancement of technology, and sufficient access to clean energy for combating climate change. U.S.’s economic partnerships and commitments with the Quad form a promising foundation, but bold, further action must be taken to achieve substantial progress. If the U.S. commits to fully disentangling itself from China’s critical minerals industry, then the world can follow suit.

The views expressed in this article are those of the author and do not represent those of any previous or current employers, the editorial body of SIPR, the Freeman Spogili Institute, or Stanford University.