Whalesbook
China's Dominance in Critical Minerals Fuels Global Energy Transition Concerns
The International Energy Agency (IEA) has issued a stark warning regarding China's unparalleled control over the refining of critical minerals essential for the global energy transition. The report highlights that China holds a dominant position in processing 19 out of 20 energy-related critical minerals, with an average market share hovering around 70%.
The Core Issue: Unprecedented Refining Concentration
China's market share is particularly staggering in key materials. It possesses 98.7% of global refining capacity for gallium, 95.2% for graphite, and 95% for manganese. For rare earths, its share stands at 92.1%, while silicon metal accounts for 84.8%. Significant concentrations are also seen in molybdenum (81%), cobalt (77.2%), tellurium (76.5%), and antimony (74%). Even in other crucial battery metals, China's share ranges broadly between 38% and 70%, with Indonesia being the sole leader in nickel refining at 42.9%.
The concentration has intensified since 2020. The average market share of the top three refining nations for key energy minerals climbed from approximately 82% in 2020 to 86% in 2024. This surge is largely attributed to the top single supplier, predominantly China for cobalt, graphite, and rare earths, contributing to 90% of supply growth.
Financial Implications and Investment Slowdown
A sustained supply shock in battery metals could dramatically increase global average battery pack prices by an estimated 40-50%. This price surge poses a significant threat to the affordability of electric vehicles and renewable energy storage solutions. Prolonged disruptions could widen cost disadvantages for battery manufacturers outside China, potentially undermining global efforts to diversify manufacturing supply chains.
Despite strong expectations for future demand growth, investment decisions are currently navigating market and economic uncertainties. Investment momentum in critical mineral development weakened significantly in 2024, with spending increasing by only 5%, a steep decline from 14% in 2023. Adjusted for inflation, real investment growth was a mere 2%. Exploration activity has also plateaued, halting the upward trend observed since 2020.
Emerging Technologies Face Similar Risks
Emerging battery technologies, such as Lithium Iron Phosphate (LFP) batteries, which have rapidly gained market share to nearly 50% of the electric car market, also face supply chain vulnerabilities. China dominates the production of purified phosphoric acid, essential for LFP batteries (75% global share), and high-purity manganese sulphate (95%), a key component for manganese-rich and sodium-ion battery chemistries. These materials are emerging as new chokepoints, with current project pipelines indicating potential for substantial supply gaps by 2030 and 2035.
Future Outlook and Global Impact
Looking ahead, the IEA projects that the geographic concentration in refining and mining is likely to persist. The share of the top three refined material suppliers is expected to decline only marginally to 82% by 2035, nearing 2020 levels. Similarly, while some diversification is appearing in lithium mining, concentration is anticipated to intensify for copper, nickel, and cobalt.
The report underscores that the supply chains for newer battery technologies are even more concentrated than for traditional nickel-based lithium-ion batteries. Policymakers are urged to pay close attention to these vulnerabilities to ensure stable and secure access to the materials needed for the green transition.
Impact Rating: 9/10
Difficult Terms Explained
Critical Minerals: Essential raw materials for modern technologies, particularly those related to green energy and advanced manufacturing, whose supply chains face significant disruption risks.
Refining Capacity: The industrial process of converting raw ore or extracted materials into purified forms suitable for manufacturing components.
Supply Chain Concentration: A situation where the production, processing, or distribution of a particular material or product is heavily dominated by a small number of countries or companies, leading to potential vulnerabilities.
LFP Batteries: Lithium Iron Phosphate batteries, a type of rechargeable battery technology that uses lithium iron phosphate as the cathode material, known for its safety and cost-effectiveness, increasingly used in electric vehicles.
Purified Phosphoric Acid: A highly purified form of phosphoric acid used as a key precursor material in the manufacturing of LFP battery cathodes.
High-Purity Manganese Sulphate: A refined chemical compound that is a critical input for certain advanced battery chemistries, including manganese-rich lithium-ion and sodium-ion batteries.