US-China race for critical minerals ignites new resource geopolitics

A new era of 'resource geopolitics' has dawned as the United States and China engage in a fierce competition to secure critical minerals, the building blocks of 21st-century technologies. This struggle echoes the 20th century's focus on oil, but with minerals now underpinning everything from semiconductors and artificial intelligence to advanced weaponry and renewable energy infrastructure.

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The geopolitical importance of critical minerals is evident. While oil was the core of great power diplomacy and military strategy in the 20th century, similar confrontations are now occurring over critical minerals.

China's overwhelming dominance in the refining and processing stages of critical minerals, especially rare earths, grants it substantial geopolitical leverage. Unlike oil, which is more widely distributed, China controls a vast majority of the global processing capacity. This concentration, with China holding an average 70% of global refining capacity for 19 energy-related critical minerals, far exceeds OPEC's share of global oil production. This strategic advantage allows China to potentially weaponize supply chain bottlenecks, forming a new kind of resource cartel that narrows the U.S.'s options.

The U.S. is responding with a robust, two-pronged approach. On one hand, it's implementing aggressive industrial policies, channeling significant funding through various government agencies like the Department of Defense, Commerce, and Energy. This includes direct equity investments and long-term purchase agreements with domestic rare earth producers, such as MP Materials, guaranteeing prices and ensuring profitability against cheaper Chinese imports. The goal is to establish an integrated supply chain, from mining to magnet production, exemplified by the planned '10X Facility' for magnet manufacturing.

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The core challenge for energy security is supply chain diversification, but recently, concentration in the refining and processing stages of critical minerals has intensified.

Simultaneously, the U.S. is pursuing international cooperation. The U.S. International Development Finance Corporation (DFC), once focused on poverty alleviation, now prioritizes investments and loans in strategic sectors like critical minerals and advanced technology. Its lending capacity has dramatically increased, approaching that of the World Bank. The U.S. is also forging critical mineral agreements with countries possessing mining and processing capabilities, aiming to diversify supply chains and reduce reliance on China. This comprehensive strategy reflects a shift towards a more assertive U.S. industrial policy, building on previous efforts but with increased intensity and scope.

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The U.S. is pursuing an integrated supply chain from mine to magnet.