China’s dominance in refining critical minerals has reached an all-time high, with the country now accounting for 19 out of 20 strategic minerals studied, according to a report by the International Energy Agency (IEA). The report found that China holds an average share of around 75% in these minerals.
Concerns About Global Supply Chains
The concentration of critical mineral refining in China raises concerns about global supply chains. IEA executive director Fatih Birol stated, "Critical mineral supply chains can be highly vulnerable to supply shocks." These supply shocks can have far-reaching consequences, including:
- Higher prices for consumers
- Reduced industrial competitiveness
Definition of Critical Minerals
The IEA defines critical minerals as those essential for clean energy technologies and other low-carbon technologies. These include:
- Lithium, cobalt, nickel, and graphite used in batteries
- Rare earths used in electric motors
- Copper used in wind turbines
Efforts by Other Countries
While China’s dominance is concerning, other countries are working to increase their production of critical minerals. For instance, Indonesia has shown strong growth in nickel production since the start of this year due to new mines coming online at:
- Halmahera Resources’ Weda Bay project
- Vale’s Gag Island mine
However, even if Indonesia were able to produce more than half its current demand for nickel—which is unlikely given its limited processing capacity—it would still only account for around one-fifth of global demand. This highlights the world’s reliance on a few countries for critical minerals.
The Impact of Supply Shocks
Birol warned, "The impact of a supply shock can be far-reaching." He emphasized that it brings higher prices for consumers and reduces industrial competitiveness. He added that governments should collaborate with industries to ensure stable and secure supply chains.
Challenges in Increasing Production Capacity
The IEA report found that while some countries have made progress in increasing their production capacity over recent years, many others face significant challenges due to:
- Geological constraints
- Lack of access to capital or technology needed to build new mines or expand existing ones
Additionally, many companies rely heavily on imports from just a few suppliers who may not always provide reliable supplies or meet international standards regarding environmental protection or labor practices. This raises concerns about human rights abuses associated with mining activities, such as artisanal mining, where children are often involved alongside adults working long hours without proper safety equipment under hazardous conditions.
Conclusion
Overall, the concentration of critical mineral refining in China and the global reliance on a few countries for these essential resources pose significant risks to global economies as demand continues to rise.
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