Chinese Puzzle For Trump 2.0: Control Of Critical Minerals

Immediately after taking over in 2021, Joe Biden officially rejoined the Paris Agreement. However Trump — widely known as a climate sceptic — has promised another withdrawal. If he indeed follows up on his promise, that will be a serious blow to the global energy transition.

His added motivation will be China’s dominance in the global refining of critical minerals. As of now, China processes over half of all lithium, cobalt, graphite and rare earth elements. So, a green world fighting climate change is likely to have the Asian giant at the pole position in terms of critical mineral resources.

This will add fuel to the next round of the US-China trade fight under Trump 2.0. The soon-to-be-inaugurated US President has already started making noises about imposing new, additional tariffs on different countries, including China. In anticipation, China on December 3 banned exports of the critical minerals gallium, germanium and antimony that have widespread military applications to the US, escalating trade tensions.

However, the reality is that China is not an absolutely dominant mining source for any of these minerals. Although the country still relies on imports of concentrates and feedstock to supply its refining and subsequent manufacturing operations, in recent times, China has accelerated its domestic and international investment in the metals and mining sector.

The projected growth in the critical mineral sectors is spread across key regions. For mining, Latin America captures the largest amount with around US$ 120 billion by 2030, driven by substantial copper production in the area.

Indonesia is likely to see the fastest growth, doubling its market value by 2030, due to its burgeoning nickel mining activities. The African continent may have a 65 per cent increase in market value, with a rapid expansion of copper production in the region.

However, the market value for refining is more concentrated, with China claiming nearly 50 per cent of it in 2030, according to Global Critical Minerals Outlook 2024. China is also projected to increase its domestic market value for critical minerals, when the country's production of copper, lithium and rare earth elements will rapidly expand.

So, the geographical shift in the energy supply line, under a global push for renewables, will be a key driver of geo-economics and geo-politics in the near future.

The Secretariat dives deep into the projected country-wise break-up of critical minerals, to trace the path of that shift, using data and information from Global Critical Mineral Outlook 2024.

Copper: The Rise And Rise Of China

The global copper supply from mines today is relatively diversified, compared to the other key energy transition minerals. The share of the top three producers was 47 per cent in 2023, and has remained at a similar level since 2015.

Chile is the world’s current largest supplier of copper, producing a quarter of the global supply. However, this is down from 30 per cent in 2015, due to declining ore grades, ageing assets and low reinvestment in expansion.

Meanwhile, with remarkable output growth, the Democratic Republic of Congo (DRC) has doubled its share of global copper supply, from 6 per cent to 12 per cent in the same period, overtaking Peru as the second-largest supplier.

China is the fourth-largest producer from mines currently, with 8 per cent of the global supply, while Russia supplies 5 per cent. Indonesia has seen impressive growth since 2020, doubling its share to 5 per cent, while the share of the Australian supply has decreased.

The top three copper mines — Escondida in Chile, PT Freeport Indonesia (Grasberg) in Indonesia and Collahuasi in Chile — produced over 10 per cent of copper globally, in 2023.

Copper refining is more concentrated than mining, with the current top three refiners’ share touching 60 per cent. Refining is concentrated in China, which has almost 45 per cent of the market share, up from 30 per cent in 2015.

Despite Chile being the world’s largest copper miner, supplying a quarter of the global supply in 2023, it produces only 8 per cent of the world’s refined copper, down from 12 per cent in 2015.

Apart from China’s dominance in copper refining, projections show that the top three refining countries will supply 59 per cent of the total global supply in 2040. This makes the future global copper supply chain vulnerable to local disruptions.

Lithium: The Fall Of Chile

Australia remains a key producer of lithium from mines, and is expected to remain so, as several new projects are coming up. In the base case scenario, Australia remains the largest producer in 2030, accounting for a third of world lithium production from mines.

China is the world’s largest consumer of lithium, and the largest refiner. The country is making significant efforts to develop domestic supplies. The Chinese share of global lithium mining has steadily increased from 6 per cent in 2016 to 17 per cent in 2023.

Latin America has traditionally been a major lithium supplier. Lithium mining is a recent phenomenon in Africa, after Zimbabwe recently ramped up production. Other countries like Ethiopia, Mali, Namibia, and possibly the DRC and Ghana, could follow suit.

Two regions have historically dominated the supply of lithium chemicals. Refining of lithium-rich brines from China and Latin America is locally done, and then exported as a refined chemical — carbonate or hydroxide.

Regional concentration in lithium production is very high at 96 per cent in 2023. It is projected to go down slightly, but still remain at a high of 84 per cent in 2040. So, the supply chain susceptibility to disruptions is also quite high.

Nickel: Indonesia’s Rise

Over the last five years, nickel mining has risen significantly, primarily driven by the rapid expansion of mining in Indonesia. Increases were also seen in Brazil, New Caledonia and Canada.

The mined nickel market has been increasingly geographically concentrated since 2018, with Indonesia’s share of global production increasing from 25 per cent in 2018 to 52 per cent in 2023.

Similar to nickel mining, refined nickel production has also gone up, once again primarily driven by an almost five-fold increase in production by Indonesia in the last five years. Indonesia’s share in nickel refining is projected to grow from 37 per cent in 2023 to 48 per cent in 2040. China’s share stands at 28 per cent in 2023 and is projected to go down to 20 per cent in 2040.

The top three refiners’ share in nickel refining is slated to increase from 69 per cent in 2023 to 72 per cent in 2040. This overwhelming reliance on top three for such an important critical mineral does not bode well for the health of the global supply chain.

Cobalt: A Tale Of Two Countries

In mining, cobalt supply is a tale of two main suppliers — the DRC and Indonesia. Mined cobalt production in the DRC is poised for significant growth in the near future as several new mines ramp up their output.

As of 2023, Indonesia has risen to become the world’s second-largest cobalt supplier. Indonesia’s cobalt production jumped by almost 20 times in the last four years.

Cobalt refining continues to remain geographically concentrated. Today, China is responsible for more than 75 per cent of the global refined cobalt supply, and its share is projected to remain at a similar level in 2040.

Finland and Japan account for around 8 per cent and 3 per cent of global refined cobalt supply in 2023 respectively. Finland’s share is likely to dwindle to 6 per cent in 2040, and Japan’s share is projected to increase marginally to 4 per cent.

The top three refining countries’ share in global cobalt supply is slated to fall marginally to 85 per cent in 2040 from 88 per cent in 2023. Therefore, the global supply chain of nickel will remain as vulnerable as other critical minerals.

The supply and refining sources of major critical minerals are highly concentrated, and they will remain so in the next two decades. One cursory look at the composition confirms the ascendancy of China as an important genesis of these extremely crucial raw materials for a green future.

Some African countries like DRC and Indonesia are other geographical fountainheads, from which the global supply chain will flow in future.

This rapidly changing contour of global production will have repercussions for future industries and businesses, as the energy pivot shifts from fossil fuels towards renewables. However, fossil fuel-rich countries may not give up their material privileges very easily.

This is the third and final part of our series on the global supply of critical minerals. You can read the first part here, and the second part here.