REEx Briefing: Where Geopolitical Risk Actually Binds-Refining, Then Reserves

Highlights

• Refining capacity, not mining, is the critical bottleneck in lithium and copper supply chains, with China controlling over 70% of lithium refining and 44% of copper refining.
• A study finds that diversifying refining, strategic stockpiling, and AI-driven productivity gains are three complementary strategies needed to reduce geopolitical risk and close supply gaps.
• While stockpiles provide short-term resilience against shocks, they worsen long-term supply shortfalls under Net Zero demand scenarios—making refinery buildout essential.

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In CAMA Working Paper (opens in a new tab) 15/2026 (February 2026), economist Joaquin Vespignani, University of Tasmania; Centre for Applied Macroeconomic Analysis at ANU, and collaborators Russell Smyth, Monash University; CAMA/ANU, Jamel Saadaoui, Université Paris 8; CAMA/ANU, and Yitian Wang also at Monash University deliver a blunt message for the clean-energy transition: the most fragile link in the lithium and copper supply chains isn’t the ore in the ground—it’s the refining chokepoint, where capacity is highly concentrated, especially in China.

The authors build “stage-specific” geopolitical risk indicators (separating reserves, mining, and refining) and find the highest geopolitical exposure sits downstream in processing. They then test three mitigation tools—refining diversification, strategic stockpiling of refined material, and AI-driven productivity gains—and argue the West needs a coordinated policy mix: diversify refining to reduce chokepoint risk, use stockpiles to cushion short-term shocks, and pursue productivity improvements to narrow looming supply gaps.

Study Methods

Instead of using one generic “risk score” for an entire mineral supply chain, the authors calculate risk by stage. They weight each country’s geopolitical risk level by its share of global reserves, mine production, or refining capacity. Then they run scenario tests:

1. What happens to refining-stage risk if China’s refining share is reduced and reallocated?
2. What happens to supply gaps if the world builds bigger refined stockpiles under IEA transition pathways, and
3. How much AI-enabled productivity growth could expand effective supply over time?

What They Found

• Refining is the geopolitical bottleneck for both minerals. Lithium and copper show their highest risk exposure at the refining stage.
• China’s dominance is the key amplifier: the paper notes China controls over 70% of lithium refining and around 44% of copper refining, making downstream supply especially sensitive to geopolitical shocks.
• Diversifying refining capacity reduces risk—more for lithium than copper, because lithium refining is more concentrated and therefore offers larger “risk-reduction gains” from diversification.
• Stockpiles buffer shocks but worsen long-run math: building strategic stockpiles of refined copper and lithium can improve short-term resilience, yet it adds to future supply requirements—in the authors’ modeling, materially expanding projected shortfalls under Net Zero-style demand trajectories.
• AI productivity gains are framed as the gap-closer: process optimization, smarter exploration, better recovery, and refinery efficiency could help narrow deficits—if adoption is real and sustained.

Limitations and Controversial Edges

This is a model-based working paper, not a guarantee of outcomes. Results depend on assumptions (IEA pathways, stockpiling rules, and simplified productivity-growth rates). The authors also highlight practical constraints: refining is politically and environmentally difficult to permit, and AI expectations can be inflated by data and reproducibility issues, as well as skills shortages and remote-site deployment hurdles.

What Should Follow

REEx takeaway: treat refining as the industrial “center of gravity.” Stockpiles are useful insurance, but insurance doesn’t build capacity. A credible Western strategy must pair new refining and processing buildout with measurable productivity programs—or the transition risks becoming a story of ambitious targets colliding with downstream bottlenecks.

Citation: Vespignani, J., Smyth, R., Saadaoui, J., & Wang, Y. (2026). Where Geopolitical Risk Binds: Stockpiling and AI as Complementary Strategies for Mitigating Supply Chain Risk in Critical Minerals (CAMA Working Paper 15/2026).