Critical Review: The Security of Critical Mineral Supply Chains

Highlights

• Over 70% of rare earth element production is concentrated in China, creating significant global market dependencies.
• Current supply chains face major risks from geographic concentration, trade restrictions, and limited recycling infrastructure.
• International collaboration and strategic investments are crucial for mitigating critical mineral supply chain vulnerabilities.

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This paper, published in Mineral Economics (opens in a new tab) (Volume 36, 2023), addresses the growing concerns around the security of critical mineral supply chains, essential for renewable energy technologies, advanced manufacturing, and national security. The authors, Dou Shiquan (opens in a new tab) and Xu Deyi, both affiliated with China University of Geosciences, Science and Education, School of Economics and Management (opens in a new tab) in Wuhan, China, aim to explore vulnerabilities in current supply chains and propose strategies to mitigate risks. With global demand for rare earth elements (REEs), lithium, and other critical minerals surging, the paper’s topic continues to be timely and vital.

Hypothesis and Framework

The authors hypothesize in this paper that current critical mineral supply chains are highly vulnerable due to geographic concentration, geopolitical risks, and insufficient investment in diversified sourcing and processing. Consequently, the duo suggests that improving supply chain security requires coordinated international policies, enhanced recycling initiatives, and accelerated domestic production capabilities.

The framework appears to integrate:

• Supply Chain Analysis: Examining geographic concentration and chokepoints in mineral extraction, processing, and trade routes.
• Risk Assessment: Identifying geopolitical and economic risks affecting key suppliers.
• Policy Review: Evaluating existing strategies to strengthen supply chains, including recycling, substitution, and alliances.

Methodology

The methodology combines quantitative analysis (e.g., trade data and resource distribution maps) with qualitative case studies of critical mineral supply chains, focusing on dominant players like China, the U.S., and the EU. The paper reviews:

• Dependency metrics for key minerals (e.g., REEs, cobalt, and lithium).
• Historical disruptions, such as China’s 2010 REE export restrictions.
• Emerging technologies and policies aimed at reducing reliance on imports.

Key Findings

First, the pair of Wuhan-based authors investigate the geographic concentration of supply. Over 70% of rare earth element production and processing is concentrated in China, creating a significant dependency on global markets. Lithium extraction is similarly dominated by a handful of countries (e.g., Australia, Chile).

When delving into geopolitical risks, Rare Earth Exchanges summarizes two primary elements, including 1) trade wars and related export restrictions, along with global competition for such resources, all exacerbating vulnerabilities,s and 2) the reliance on single points of failure in the supply chain (e.g. China’s processing dominance) all posing risks to energy transition goals. Another risk the authors don’t mention, given that it was 2023 when the paper was published, is the incoming U.S. President Donald Trump, who will likely have America exit the Paris Agreement, cease electric vehicle mandates, and the like.

Another key set of risks involves the lack of recycling and alternatives. Recycling rates for critical minerals are low, with minimal infrastructure for recovering REEs or lithium from end-of-life products.  Substitution technologies remain underdeveloped, leaving industries highly reliant on primary extraction.

What are the Policy Gaps?

While initiatives like the U.S. Critical Minerals Strategy and the EU’s Raw Materials Alliance aim to address vulnerabilities, they lack sufficient coordination and investment_.  Rare Earth Exchanges_, launched in mid-October 2024, can confirm the lack of necessary investment in the West to disrupt China’s rare earth complex anytime soon.

The paper emphasizes the need for international collaboration to mitigate risks and incentivize sustainable practices.

Limitations

This paper lacked empirical evidence, rather relying heavily on past case studies (e.g., China’s REE restrictions) without robust modeling to predict future scenarios.  Quantitative data on resource distribution and trade flows is included, but limited statistical analyses or predictive models are presented.

The policy solutions seem oversimplified. Recommendations like “international collaboration” and “increased investment in recycling” lack detailed implementation strategies or assessments of feasibility.

The paper overlooks the technical and economic challenges of scaling domestic processing capabilities for critical minerals.

Furthermore, the authors neglect environmental and social impacts.  While focused on supply chain security, the paper does not address the environmental costs or social implications (e.g., labor conditions, community displacement) of expanding mining and processing operations.

What are some key assumptions and possible bias picked up by Rare Earth Exchanges?

First, we suggest an overreliance on technological fixes. The authors assume that recycling and substitution technologies will become viable solutions in the near term without critically analyzing the technological or economic barriers to achieving this.  The more likely scenario are bursts of innovation followed by periods of incremental deployment.

The paper appears overly optimistic about the potential for international alliances to resolve supply chain challenges, downplaying the geopolitical rivalries that complicate such efforts.

Perhaps the pair of authors exhibit some bias in their underestimation of China’s strategic position.

While recognizing China’s dominance in critical mineral supply chains, the analysis underestimates China’s strategic investments in upstream and downstream capabilities, which may further entrench its position.

Conclusion

The paper offers an important overview of critical mineral supply chain vulnerabilities and highlights important policy gaps, particularly the need for diversification, recycling, and international cooperation.

However, its recommendations lack specificity, and it underexplores the environmental, social, and technological challenges involved in securing these supply chains.

While the hypothesis that current supply chains are vulnerable is well-founded, the paper’s reliance on optimistic assumptions about policy coordination and technological advances reduces its practical applicability. A more nuanced exploration of geopolitical dynamics and actionable policy frameworks would enhance its impact on stakeholders in government, industry, and academia.