The race for rare earth and critical minerals: From risk to results

January 21, 2026

Synthetic carborundum chemical compound. Use as abrasive, semiconductor or diamond gem simulant. Raw moissanite — Image: © Ladislav Kubeš | iStock

Cecilia Van Cauwenberghe at Everest Group, examines the competition for rare earth and critical minerals, discussing how governments and companies can transform a contested supply chain into a sustainable economic opportunity

Setting the stage for a new industrial era

The accelerating global energy transition has triggered one of the most consequential realignments of industrial strategy since the mid-twentieth century. At the center of this transformation lies a class of materials rarely discussed beyond technical circles – rare earth elements (REEs) and critical minerals such as lithium, cobalt, nickel, and graphite. These resources are not inherently scarce, but their extraction, refinement, and integration into advanced technologies are geographically concentrated and strategically sensitive. ⁽¹⁾

Today, nearly every high-value technology – electric vehicles (EVs), wind turbines, smartphones, semiconductors, defense systems, and advanced energy storage – depends on these materials. According to the International Energy Agency (IEA), demand for critical minerals used in clean energy technologies has more than tripled since 2017, with lithium demand growing over sixfold in that period. ⁽¹⁾

This rising dependence on a limited set of supply chains has profound implications. Critical minerals have become the connective tissue linking industrial policy, energy security, and economic competitiveness. In essence, the global race to control them is both a risk to resilience and an opportunity to reindustrialize through cleaner, higher-value production.

This article examines how nations and corporations are adapting to this race – reconfiguring policies, capital, and technology to establish sustainable mineral ecosystems. It also discusses the emerging frameworks that can turn a geopolitically contested market into a foundation for shared industrial growth.

Understanding the fault lines of supply concentration

While mining has diversified marginally, processing remains overwhelmingly centralized. The IEA’s 2025 Global Critical Minerals Outlook reports that the top three refining countries account for approximately 86% of global midstream processing across key transition minerals, up from 82% in 2020.⁽¹⁾ This means that, despite new exploration projects in Africa, Latin America, and Australia, the critical steps that determine purity and value still depend heavily on a handful of nations – principally China.

China commands 70–90% of rare earth refining and magnet production and exerts similar control over graphite and antimony processing.⁽¹⁾ Its dominance is underpinned by decades of coordinated industrial policy, subsidies, and ecosystem integration from mine to magnet. This structural advantage enables Beijing to exercise leverage through targeted export restrictions, such as recent curbs on gallium, germanium, and high-purity graphite. ⁽⁸⁾

For other economies, this asymmetry is a wake-up call. The risk is less about geological scarcity than about midstream vulnerability – the thin layer of technology and capital intensity between mining and manufacturing, where most value is created. Supply disruptions here can ripple across entire industries, from clean energy to defense.

Recognizing this, governments and private actors are shifting focus toward rebuilding and diversifying the processing and manufacturing segments of the value chain. This approach marks a strategic departure from decades of reliance on globalized, cost-minimized supply chains toward one that prioritizes resilience, transparency, and regional balance.

Policy frameworks reshaping the mineral landscape

In response to the concentration of refining capacity, advanced economies have launched coordinated initiatives to secure alternative supply channels and accelerate local capacity. The European Union’s Critical Raw Materials Act (CRMA), approved in 2024, set explicit benchmarks: by 2030, the EU aims to mine at least 10% of its strategic mineral needs domestically, process 40% within the bloc, and recycle 25%. ⁽⁵⁾ It also introduced a diversification threshold, limiting any single third country to supplying no more than 65% of a given strategic material.

Across the Atlantic, the United States is operationalizing the Inflation Reduction Act’s Section 30D provisions and Foreign Entity of Concern (FEOC) rules. Beginning in 2025, EV tax credits will exclude vehicles containing critical minerals or battery components sourced from restricted entities. (6,7) This requirement is driving automotive and battery manufacturers to establish transparent, traceable mineral supply chains from friendly nations.

Meanwhile, emerging economies are adopting resource nationalism as a means of capturing more value from their mineral wealth. Indonesia’s ban on raw nickel exports and Bolivia’s insistence on domestic lithium processing are emblematic of a global trend in which governments are seeking to localize downstream operations. ⁽¹⁾ These strategies promise greater revenue retention but introduce regulatory uncertainty and potential friction with investors.

The intersection of these policies is reshaping global trade patterns. Supply agreements are no longer purely commercial; they are becoming instruments of industrial diplomacy, where compliance with environmental, social, and governance (ESG) standards and digital traceability is as critical as cost competitiveness.

Building industrial ecosystems: Case studies in progress

Recent examples demonstrate that the race for critical minerals can foster industrial reinvention rather than fragmentation when guided by coherent policy and
investment.

U.S.: Closing the mine-to-magnet loop

MP Materials has advanced from mining to magnet manufacturing, creating an integrated U.S. supply chain from Mountain Pass, California, to its new facility in Fort Worth, Texas. The site began producing neodymiumpraseodymium (NdPr) metal in 2024 and anticipates scaling up to approximately 1,000 tons of finished magnets per year. (10) This marks the first significant reestablishment of domestic rare earth magnet production in the United States in decades – a cornerstone for automotive and defense applications compliant with FEOC regulations.

Australia: Scaling value through processing

Lynas Rare Earths inaugurated its Kalgoorlie cracking and leaching plant in Western Australia, enabling the company to process rare earth concentrates domestically rather than exporting them to Malaysia.⁽¹¹⁾ In parallel, the U.S. Department of Defense funding supports a Lynas heavy rare earth separation plant in Texas. ⁽¹²⁾ Together, these projects demonstrate how allied partnerships can distribute critical processing steps across secure jurisdictions.

Europe: Circular economy and midstream reconstruction

Europe’s industrial revival is equally notable. Solvay has expanded rare earth processing in La Rochelle, France, targeting magnet-grade oxides ⁽¹³⁾, while Neo Performance Materials opened Europe’s first large-scale REE magnet facility in Estonia. Both align directly with CRMA objectives, reducing the EU’s near-total reliance – currently about 98% – on Chinese magnet imports. ⁽⁴⁾

At the same time, the EU’s Battery Regulation (2023/1542) and the battery passport initiative under the Global Battery Alliance are setting global standards for traceability, recycled content, and sustainability. ^(14,15) These measures not only mitigate supply risk but also drive innovation in recycling and circular design.

Africa and Latin America: Value capture through beneficiation

Resource-rich countries such as the Democratic Republic of the Congo (DRC) and Chile are moving up the value chain. The DRC’s pivot to local cobalt processing has lifted export revenues to approximately US$6 billion in 2022.⁽²⁾ In South America, Chile’s state-led lithium strategy seeks to position the country as a full-value participant in battery supply chains, blending national ownership with private partnerships. ⁽¹⁾

These initiatives illustrate how coordinated investment in processing and refining can transform the political economy of critical minerals – from commodity dependence to industrial opportunity.

Innovation as a lever for resilience and sustainability

Technological innovation is emerging as the most effective lever to reduce dependency and environmental impact simultaneously.

Direct lithium extraction (DLE) technologies exemplify this trend. Unlike traditional evaporation ponds, DLE systems use selective adsorption and ion-exchange membranes to recover lithium more efficiently and with lower water intensity. In 2025, Standard Lithium and Equinor secured up to US$225 million from the U.S. Department of Energy to commercialize a DLE project in Arkansas – the first of its kind in North America. In Canada, E3 Lithium has validated similar processes through pilot testing in Alberta.

In parallel, rare earth processing is being localized in new regions. Iluka Resources’ Eneabba refinery in Western Australia, supported by a $1.6 billion government loan, will be one of the world’s first integrated refineries outside China. This plant will cover the full rare earth spectrum, further diversifying global supply.

Recycling is another frontier of innovation. In the United States, Redwood Materials has demonstrated closed-loop battery material recovery, scaling hydrometallurgical recycling of nickel, cobalt, and lithium, and producing battery-grade anode copper foil domestically. ⁽¹⁶⁾ In the United Kingdom, HyProMag and Mkango Resources have pioneered magnet recycling using Hydrogen Processing of Magnet Scrap (HPMS) technology to recover neodymium and other REEs from end-of-life motors. ⁽¹⁷⁾ European initiatives such as Carester and Heraeus Remloy are building complementary facilities to meet CRMA recycling targets.

While recycling volumes remain minor relative to demand, projections suggest that by the mid-2030s, recovered materials could meet 15–20% of global needs for several key metals.^(14,15) Beyond material recovery, recycling also supports compliance with upcoming EU mandates on recycled content, creating both regulatory and economic incentives for scale-up.

These technological shifts – DLE, HPMS recycling, and advanced separation methods – highlight an emerging paradigm: innovation in process efficiency is as strategically significant as innovation in product design. It reduces lead time, mitigates geopolitical exposure, and improves ESG performance in parallel.

Governance, traceability, and investment alignment

As supply chains regionalize, governance and transparency have become strategic differentiators. The proliferation of standards –ranging from the OECD Due Diligence Guidance for Minerals to the battery passport protocols – is transforming compliance from a reporting exercise into a competitive advantage. ⁽¹⁸⁾

Digital traceability systems built on blockchain and advanced analytics are increasingly integrated into sourcing workflows. These systems allow companies to verify origin, assess ESG performance, and align with policy frameworks such as the EU CRMA and U.S. FEOC rules. The convergence of these tools is fostering a new kind of “policy-grade” supply chain, where eligibility for incentives and market access depends on demonstrable transparency.

Investment capital is following suit. Governments and development finance institutions are mobilizing billions to co-fund infrastructure for critical minerals. The Minerals Security Partnership (MSP) – a multilateral initiative led by the United States and involving the EU, Australia, Canada, and other partners – has evolved into a coordinating platform for public–private finance. Within Europe, CRMA-designated strategic projects can access blended financing and streamlined permitting. ⁽⁵⁾

These frameworks are not only crowding in capital but also establishing shared benchmarks for responsible mining, refining, and recycling. The convergence of industrial policy, sustainability regulation, and digital compliance systems signals a long-term shift from reactive crisis management toward institutionalized resilience.

Outlook: From geopolitics to industrial renewal

The global race for rare earths and critical minerals will define industrial competitiveness through the 2030s. The outcome will not hinge solely on who controls the largest reserves but on who masters the integration of policy coherence, technological innovation, and cross-border collaboration.

By 2030, diversification will have progressed meaningfully but not wholly. China will remain a dominant player, yet its share of refining and magnet production is expected to decline as projects in North America, Europe, and Australia mature. ^(10,13) Recycling and circular economy initiatives will supply a growing fraction of inputs, cushioning volatility and reducing environmental impacts. ^(14,15)

However, significant challenges persist. Reaching CRMA mining targets appears unlikely within the decade due to permitting delays, public opposition, and infrastructure gaps.⁽⁵⁾ Price volatility will remain elevated, driven by export restrictions, evolving ESG requirements, and periodic demand surges from emerging sectors such as defense and grid-scale storage. ⁽⁸⁾

Still, the momentum is unmistakable. For governments, critical minerals policy has become a lever for industrial renewal and technological sovereignty. For companies, it has evolved from a procurement challenge into a strategic imperative linking sustainability, compliance, and competitiveness. For both, the race is no longer only about access, but about creating durable value systems that can withstand both geopolitical stress and environmental scrutiny.

In transforming critical minerals from a source of vulnerability into an engine of industrial resilience, nations and corporations are not merely reacting to scarcity – they are building the architecture of the next industrial era.