IEA (2022), Critical Minerals Policy Tracker, IEA, Paris https://www.iea.org/reports/critical-minerals-policy-tracker, License: CC BY 4.0
Ensuring supply reliability and resiliency
Recent price trends have emphasised the need for policy intervention to enhance critical mineral supply reliability and resiliency. In the past year, the prices of many minerals and metals have soared as a result of rising demand, supply chain disruptions and concerns about tightening supplies.
In addition to these risks, production and processing operations for many minerals are highly concentrated in a small number of countries. Although investment in supply source diversification is rising, most near-term output growth for many minerals is still expected to come from today’s major producers, implying an even higher degree of concentration in the years ahead.
This high level of concentration means the system is particularly vulnerable to disruptions – caused by geopolitical events, global pandemics, earthquakes or other weather events, or shutdowns associated with adverse environmental, social or governance incidents (such as regulatory interventions following corruption allegations). Any disruption that interrupts operations at a large facility or group of facilities can have a major impact on supply availability, and therefore on prices.
Countries can choose from a variety of policy options to reduce or minimise supply disruption risks and prepare the market to respond when necessary. Underlying many of these policies are national strategic plans and official lists designating minerals as “critical” or “strategic.”
Governments may also establish direct response mechanisms, such as stockpiling systems, and international co‑ordination frameworks that provide a forum for countries to work together to both prevent and respond to disruptions.
Finally, some governments may use public funding to enlarge domestic supply sources through state-owned enterprises, direct equity investment or government procurement programmes designed to provide a guaranteed buyer for materials meeting certain criteria.
Policy snapshot: Ensuring supply reliability and resiliency
One of the first challenges many governments face is deciding which minerals should be deemed critical and therefore covered by targeted policies that aim to secure reliable and resilient supplies. In fact, many countries have already published official critical mineral lists.
While the IEA report The Role of Critical Minerals in Clean Energy Transitions focuses on just the minerals required for clean energy technologies, governments typically consider the energy sector as just one element among many in compiling official lists of strategic or critical minerals.
Although all the mineral lists contain common threads, they still vary considerably because countries use different criteria as the basis for national prioritisations. The most common criterium is whether a particular mineral is of significant importance to the national economy, but other key criteria include whether its supply chain is subject to high risk of supply disruption, whether it is important for national defence or security, and whether the country has significant untapped reserves. Criteria diversity reflects the differences in countries’ development priorities and industry needs.
Comparison of strategic and critical mineral designations of selected countries
|Australia||Brazil||Canada||Colombia||European Union||Japan||United States|
|Minerals widely designated as strategic or critical:|
|Rare earth elements|
|Minerals designated by some countries but not others:|
|Minerals designated by at least one country but not needed in large quantities for energy transitions:|
|Antimony, arsenic, germanium, gold, hafnium, iridium, iron, magnesium, niobium and tungsten.|
Major producer countries tend to focus on the importance of mineral exploitation to their economy and trade balances. The Democratic Republic of the Congo (DRC), for example, issued a decree listing three minerals as strategic – cobalt, germanium and columbite-tantalite (“coltan”) – of which the DRC has significant reserves. Following this designation, the country now legislates conditions for access, exploration and commercialisation of these minerals under a separate framework.
Meanwhile, importing economies typically focus on identifying which minerals are necessary for important or strategic sectors of the economy and for which demand far outstrips domestic production. The European Union’s Critical Raw Materials List, for example, includes materials deemed critical to maintain a healthy economic system and whose supply may be at risk because of geopolitical, geographical, geological or other factors. The list includes battery materials (e.g. lithium, cobalt, graphite), rare earth elements, and several other minerals that EU countries do not produce in significant quantities. It is updated every three years to reflect industry developments and supply changes.
Some countries try to address all potentialities when identifying critical minerals. In Brazil, for example, three categories of minerals are considered strategic: minerals that are imported in large quantities and that supply vital sectors of the economy (e.g. molybdenum and phosphate); minerals important for the manufacture of high-tech products (e.g. cobalt and graphite); and minerals essential for the economy because they generate a trade balance surplus (e.g. aluminium, copper and iron).
These lists are not static, however, as they can be updated to reflect a country’s changing priorities. The United States generally focuses on minerals that are prone to supply chain disruptions and that are critical for either national security or economic development. Thus, fuel minerals such as uranium were removed in the latest revision to the US critical minerals list and rare earth minerals were unbundled and are now listed separately as cerium, gadolinium, lanthanum, neodymium, praseodymium and samarium.
Given the complexity of mineral supply chains, countries can benefit from a co-ordinated approach to collectively manage risks at the global level. Encouragingly, many international initiatives have emerged in recent years to address various supply chain challenges.
Government-to-government, countries have already been working together through institutions such as the OECD and the World Bank to support sustainable mining and supply chain practices. Meanwhile, some governments have individually launched extractives-specific initiatives such as the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) and the Energy Resource Governance Initiative (ERGI) to provide technical assistance to mineral-producing countries. Public-private collaborations have also spawned successful programmes covering many segments of critical mineral supply chains.
Among the prominent examples of international collaboration structures expressly targeting security of supply, the United States convened a new Minerals Security Partnership (MSP) in June 2022, initially involving Australia, Canada, Finland, France, Germany, Japan, Korea, Sweden, the United Kingdom, the United States and the European Union. The MSP aims to strengthen security of supply through information-sharing, greater investment in secure critical mineral supply chains, and the development of recycling technologies.
Participating countries have pledged to catalyse investment in mining, processing and recycling activities that adhere to the highest environmental, social and governance standards. The MSP has also approached individual producer countries, with Argentina, Brazil, the DRC, Mongolia, Mozambique, Namibia, Tanzania and Zambia participating in a recent high-level event.
Some governments have also begun to work bilaterally with like-minded countries. For instance, Canada and the European Union have formed a Strategic Partnership on Raw Materials to raise the value, security and sustainability of trade and investment in critical minerals to the levels needed to transition to a digitalised green economy. Areas of collaboration include value chain integration and innovation, and the reinforcement of environmental, social and governance standards.
Canada also established a Joint Action Plan on Critical Minerals Collaboration with the United States to advance bilateral work on securing supply chains for the critical minerals needed in strategic manufacturing sectors, including communications technology, aerospace, defence and clean energy technology.