Competition over essential minerals escalates
In the modern world, the control of critical minerals has become a significant global issue, with China dominating the refining of essential elements such as cobalt, lithium, rare earth elements (REEs), gallium, and others. This control poses significant economic and national security threats, particularly to industries vital for defense and the green transition.
China's monopolistic practices and opaque deals have raised concerns, with the country refining about 73% of global cobalt, 68% of nickel, 59% of lithium, and 61% of rare earths. Beijing's control extends to 90% of rare earth elements used in critical military technologies such as jet-fighter magnets and drone motors.
This dominance has led to strategic vulnerability, overreliance on a single supplier for defense-critical minerals, which threatens national security and technological independence. China has weaponised this market dominance by limiting exports to Western defense sectors, causing production delays and price spikes in essential minerals. The small market size of some minerals like gallium amplifies China’s leverage since even minor supply disruptions have outsized effects on price and availability, impacting defense supply chains in the U.S. and allies.
To combat these threats, resource-rich countries can adopt strategies to avoid the resource curse and manage their resources more effectively. These strategies include improving governance and transparency, diversifying partnerships and supply chains, adding value domestically, sustainable resource management, and international cooperation and alliances.
Improving governance and transparency involves enforcing transparent, public mining contracts to avoid secretive deals that favor foreign state-backed enterprises. Strengthening institutions is crucial to ensure minerals revenues benefit national development rather than fostering corruption or social conflict.
Diversifying partnerships and supply chains means collaborating with multiple foreign investors and buyers instead of allowing dominance by a single country or company to reduce geopolitical risk. Encouraging investments from a broad group of countries or corporations outside of China is also beneficial.
Adding value domestically involves developing refining and downstream processing capabilities locally or regionally to move beyond raw exports and capture more economic value. Supporting infrastructure and technology transfer to build industrial capacity around critical minerals is equally important.
Sustainable resource management requires adopting policies that prioritize environmental protection, community rights, and long-term economic planning to avoid boom-bust cycles typical of resource dependence. Investing in recycling and alternative material research to reduce raw material demand pressure is also crucial.
International cooperation and alliances involve forming strategic alliances with like-minded countries to secure alternative sources, share technology, and build joint stockpiles or recycling programs.
Many mineral-rich countries, such as the Democratic Republic of the Congo, are falling short in managing risks raised by resource extraction, including health and environmental damage, labour-rights violations, and child labour. The demand for critical minerals, including rare-earth metals, cobalt, and uranium, is expected to quadruple by 2040 for use in clean-energy technologies alone.
It is up to mineral-rich countries to defend their interests and make the most of their endowments, which starts with efforts to strengthen institutions. The European Union is seeking mining contracts, such as in the Democratic Republic of the Congo, which is known as the "Saudi Arabia of critical minerals."
However, resource-rich countries and regions often grapple with internal and external conflicts. The DRC, with its mineral-rich provinces like Katanga and North Kivu, has long suffered from violence and lawlessness, fueled by neighbours such as Rwanda and Uganda.
In conclusion, while China’s current dominance over critical minerals presents serious economic and security risks, resource-rich countries can combat the resource curse through good governance, diversification, value addition, sustainability, and international partnerships that build resilience against geopolitical and market pressures.
- The demand for critical minerals, such as rare-earth metals, cobalt, and uranium, is projected to quadruple by 2040 for use in clean-energy technologies alone, highlighting the significance of biodiversity and sustainable resource management in mineral-rich countries.
- As the European Union seeks mining contracts in mineral-rich countries like the Democratic Republic of the Congo, it's crucial for these countries to focus on education-and-self-development, strengthening institutions to ensure transparency and prevent corruption in mining contracts.
- To mitigate the threats posed by deforestation due to critical mineral extraction, resource-rich countries should incorporate long-term economic planning and environmental protection policies into their sustainable resource management strategies, ensuring a balance between economic growth and preservation of biodiversity.
