More than 80% of the world’s rare earth elements are mined and processed in China. The same country controls over 60% of lithium refining and nearly 75% of cobalt processing. These aren’t just numbers-they’re choke points in the global supply chain for clean energy, electric vehicles, and defense tech. When countries try to build green economies, they’re not just buying batteries or wind turbines. They’re buying access to a handful of mines, processing plants, and shipping routes controlled by a few actors. This is the new reality of energy trade: it’s not about oil anymore. It’s about rare earths, lithium, nickel, graphite, and the hidden dependencies that come with them.
What Makes a Commodity ‘Strategic’?
A strategic commodity isn’t just rare or expensive. It’s something that, if cut off, would cripple entire industries or national security systems. Rare earth elements like neodymium and dysprosium are critical for the magnets in electric motors and wind turbines. Lithium and cobalt power the batteries in everything from smartphones to Tesla trucks. Graphite is the anode in most lithium-ion cells. Nickel boosts energy density. Without these, the transition to renewable energy stalls.
What makes them strategic isn’t scarcity in the ground-it’s scarcity in processing. The U.S. has rare earth deposits in Mountain Pass, California. Australia has lithium mines in Western Australia. But turning those raw ores into usable materials? That’s where the bottleneck is. Only a few countries have the chemical plants, environmental permits, and workforce trained to do it at scale. China built this processing network over decades. Other nations are only now starting to catch up.
Rare Earths: The Invisible Backbone of Modern Tech
Most people don’t know what rare earth elements are. But they use them every day. The tiny magnets in your earbuds? Made with neodymium. The laser in your barcode scanner? Uses erbium. The catalytic converter in your car? Contains cerium. Even the screens on your phone rely on europium and terbium for color.
These elements aren’t actually rare in the Earth’s crust. But they’re rarely found in concentrated, economically viable deposits. And when they are, extracting them is messy. It takes about 1,200 tons of ore to produce one ton of rare earth oxides. The process generates radioactive waste, acid runoff, and toxic sludge. That’s why many countries stopped mining them in the 1990s-environmental rules made it too costly.
China didn’t have those same restrictions. By the early 2000s, they were producing 95% of the world’s supply. They didn’t just mine them-they controlled the entire chain: extraction, separation, alloying, and export. When tensions rose with Japan in 2010, China temporarily halted rare earth exports. The price of neodymium spiked 10x in months. Companies scrambled. Some shifted production to Vietnam or Malaysia. Others started stockpiling. The lesson stuck: supply isn’t just about mining. It’s about control.
Battery Materials: The New Oil Rush
Electric vehicles need lithium-ion batteries. Those batteries need four key materials: lithium, cobalt, nickel, and graphite. In 2024, global EV sales hit 14 million units. That’s 14 million batteries, each requiring 8-12 kilograms of lithium carbonate equivalent. By 2030, demand could triple. But where does it come from?
Lithium is mostly mined in Australia (hard-rock spodumene) and Chile (salt brine). But refining it into battery-grade lithium hydroxide? Over 70% happens in China. Cobalt? 70% comes from the Democratic Republic of Congo, where mining is often tied to child labor and unstable governance. Nickel? Indonesia now dominates with 35% of global supply, thanks to export bans on raw ore that forced processors to build smelters there.
That’s the new game: countries don’t just want the raw material. They want the refinery. Indonesia banned raw nickel exports in 2020. Within three years, it went from being a miner to the world’s top producer of nickel matte-a key intermediate for batteries. Same with Vietnam and lithium. Same with Malaysia and rare earth separation. The value isn’t in the dirt. It’s in the chemistry.
Energy Trade Dependencies: The New Geopolitical Fault Lines
Think of energy trade like a house of cards. The U.S. wants to build 500,000 charging stations by 2030. The EU wants 10 million EVs on the road. India wants to cut coal use by 50%. But they can’t do it without materials they don’t control.
The U.S. Inflation Reduction Act gives tax credits for EVs made with North American battery components. But if 60% of the lithium comes from Chile, and 80% of the processing is in China, does that count? The EU’s Critical Raw Materials Act requires 40% of key materials to be sourced from within its borders by 2030. Can it happen? Not without massive investment in recycling, new mines, and processing plants.
Meanwhile, China is signing long-term supply deals with Brazil, Argentina, and Zimbabwe. It’s investing in lithium projects in Africa. It’s building smelters in Southeast Asia. It’s not just securing supply-it’s building the infrastructure that others will depend on. The result? A fragmented global trade system. One where countries are forced to pick sides-not based on ideology, but on access to materials.
Who’s Building Alternatives?
Some nations are trying to break free. The U.S. is funding new lithium projects in Nevada and potassium chloride extraction in Utah. Canada is backing rare earth projects in Quebec and Ontario. Australia is expanding its battery material refineries. The UK is investing in recycling tech to pull lithium from old phone batteries.
But scale is the problem. Building a single rare earth separation plant takes $500 million and five years. It needs skilled chemists, regulatory approvals, and a steady power supply. Most Western governments can’t move that fast. Private companies are trying, but without government backing, they can’t compete with China’s state-backed giants.
One promising path is recycling. Today, less than 5% of lithium-ion batteries are recycled. But new hydrometallurgical processes can recover 95% of lithium, cobalt, and nickel from spent cells. Companies like Li-Cycle in Canada and Redwood Materials in Nevada are scaling up. If recycling hits 30% of supply by 2030, it could cut demand for new mining by a third. That’s not a silver bullet-but it’s a real cushion.
What Happens If Supply Chains Break?
Imagine a conflict in the South China Sea disrupts shipping. Or Indonesia bans nickel exports again. Or a flood shuts down a lithium brine operation in Chile. The ripple effects aren’t theoretical.
Automakers already cut EV production in 2022 when cobalt prices spiked. Wind turbine makers delayed projects when dysprosium shortages hit. Defense contractors paused missile guidance system production because of rare earth delays. These aren’t supply chain hiccups. They’re strategic vulnerabilities.
Stockpiling helps-but only temporarily. The U.S. Strategic Reserve holds 2,000 tons of rare earth oxides. That’s enough for about two months of current demand. It doesn’t solve the processing gap. It doesn’t fix the lack of skilled labor. It doesn’t replace the need for long-term partnerships.
What’s worse? Countries are starting to weaponize access. China restricts exports of gallium and germanium-materials used in semiconductors and radar systems. The U.S. bans exports of advanced chipmaking tools to China. The EU is considering similar controls on battery tech. Trade isn’t just about tariffs anymore. It’s about controlling the inputs that make modern technology possible.
The Path Forward: Diversify, Recycle, Innovate
There’s no single fix. But there are three clear actions that can reduce dependency:
- Diversify sources-Invest in mines and processing in Canada, Australia, Brazil, and Africa-not just one country. Support joint ventures that include local ownership and environmental safeguards.
- Scale recycling-Make battery take-back programs mandatory. Fund R&D for efficient recovery tech. Tax raw material imports to make recycled content more competitive.
- Innovate around materials-Develop batteries that use less or no cobalt. Explore sodium-ion batteries for lower-cost applications. Research alternatives to rare earth magnets, like ferrite or manganese-based designs.
Some companies are already doing this. Tesla’s 4680 battery uses less nickel and no cobalt. Toyota’s solid-state battery prototypes skip lithium altogether. Ford and Volkswagen are partnering with recycling firms to close the loop. These aren’t just green initiatives-they’re survival strategies.
The age of cheap, abundant energy is over. The next era will be defined by who controls the materials that make clean energy possible. The countries that act now-building processing capacity, investing in recycling, and forging fair partnerships-won’t just be greener. They’ll be more secure.
Why are rare earth elements so important for clean energy?
Rare earth elements like neodymium and dysprosium are essential for making strong, lightweight magnets used in electric vehicle motors and wind turbine generators. Without them, these technologies become heavier, less efficient, or too expensive to scale. Even though they’re not rare in the Earth’s crust, their extraction and separation are complex and concentrated in just a few countries, making them a critical bottleneck.
Is China the only country that processes battery materials?
No, but China dominates. It processes over 60% of the world’s lithium, 75% of its cobalt, and nearly 90% of its rare earth elements. Other countries like Australia, Canada, and the U.S. are building processing capacity, but they’re years behind. Indonesia is also rising fast in nickel refining. The gap isn’t just in mining-it’s in the chemical engineering and scale of industrial processing.
Can recycling solve the supply problem?
Recycling won’t replace mining entirely, but it can cut demand significantly. Today, less than 5% of lithium-ion batteries are recycled. New technologies can recover up to 95% of lithium, cobalt, and nickel from spent cells. If recycling reaches 30% of supply by 2030, it could reduce the need for new mining by a third. Governments need to mandate take-back programs and fund the infrastructure to make this work at scale.
What’s the biggest risk in the current trade system for these materials?
The biggest risk is over-reliance on a single country or region for processing. Even if you mine lithium in Australia or cobalt in the DRC, if you send it to China for refining, you’re still dependent on their policies, politics, and logistics. A trade dispute, export ban, or port shutdown could instantly disrupt global EV and renewable energy production.
Are there alternatives to rare earth magnets and lithium batteries?
Yes, but they’re not ready to replace them at scale yet. Sodium-ion batteries are cheaper and use abundant materials, but they’re heavier and store less energy-good for grid storage, less so for cars. Some automakers are testing iron-phosphate batteries that don’t use nickel or cobalt. For magnets, researchers are developing ferrite-based or manganese-aluminum alloys, but none match the power-to-weight ratio of rare earth magnets yet. Innovation is happening, but it takes time.
Looking ahead, the countries that succeed won’t be the ones with the most mines. They’ll be the ones with the most resilient supply chains-built on recycling, local processing, and smart partnerships. The race isn’t just for energy. It’s for control over the hidden materials that make modern life possible.
