The International Energy Agency (IEA) has warned that critical minerals have become central to global energy, economic and national security strategies as supply chain concentration, geopolitical tensions and export restrictions reshape the market. While concerns over copper supply remain significant, governments are increasingly focusing on resilience, diversification and securing reliable access to critical minerals needed for clean energy, electric vehicles, semiconductors, defence and artificial intelligence.
Critical mineral prices staged a strong recovery during 2025 and early 2026 after previous declines. Prices for aluminium, copper and tin increased by one-third between January 2025 and April 2026, with copper reaching record highs. Lithium prices more than doubled due to strong energy storage demand and constrained supply, while cobalt prices surged around 130 percent following export restrictions imposed by the Democratic Republic of the Congo (DRC). Prices of strategic minor minerals also more than doubled, with tungsten prices soaring sixfold, IEA report said.
Export controls have widened price gaps across regions. European prices for gallium and heavy rare earth elements such as dysprosium and terbium are now around five times higher than Chinese domestic prices, while germanium prices are almost three times higher, highlighting growing supply challenges outside China.
Supply concentration in refining continued to increase during 2025. Indonesia remained dominant in nickel refining, while China strengthened its position across most other critical minerals, accounting for more than three-quarters of refined supply growth over the past two years. Excluding rare earths, the leading refining country’s average market share increased to 72 percent in 2025 from 70 percent in 2023. Rare earths were the exception, with new refining projects in the United States and increased production in Malaysia slightly reducing concentration.
Although supply outlooks for copper and lithium have improved, shortages remain likely through 2035. The projected copper supply deficit for 2035 has narrowed to 25 percent from around 30 percent estimated a year earlier, supported by new mining projects in the DRC and Zambia. However, cobalt now faces an emerging supply gap due to new export quotas introduced by the DRC.
Trade restrictions have accelerated sharply. The number of mineral tariff codes covered by Chinese export controls has tripled since 2023, while Zimbabwe introduced lithium export restrictions, Mozambique restricted graphite exports and the DRC imposed cobalt export quotas. China introduced export controls on seven heavy rare earth elements in April 2025, disrupting automotive manufacturing and forcing some vehicle producers to temporarily halt operations. Expanded restrictions announced in October 2025 were suspended until November 2026, but their implementation could place an estimated USD 6.5 trillion of annual downstream production outside China at risk across automotive, defence, high-tech and energy industries.
China also imposed export controls on cathode materials, cathode precursors, graphite anode materials, battery manufacturing equipment and related technologies. A complete disruption in battery-grade graphite trade could threaten more than USD 300 billion of annual downstream production outside China.
The IEA said strategic stockpiles could provide an important buffer against supply disruptions. The agency estimates that maintaining stockpiles for 11 high-risk critical materials would cost countries outside the dominant supplier less than USD 900 million annually, a relatively small investment compared with the potentially severe economic consequences of supply interruptions.
The Middle East conflict exposed additional vulnerabilities. The region produces around 8 percent of global aluminium and supplies approximately one-quarter of global sulphur, while half of global seaborne sulphur trade passes through the Strait of Hormuz. Supply disruptions prompted China to restrict sulphuric acid exports in May 2026, causing acid prices to surge. Sulphuric acid became the largest production cost for several critical minerals, overtaking energy costs in some operations.
Investment in critical minerals weakened during 2025. Overall investment declined by 9 percent, ending several years of growth. Battery metals experienced the sharpest decline, with capital expenditure falling by more than 20 percent. Lithium producers reduced investment by around 40 percent, while copper-focused companies increased spending by 8 percent, reflecting confidence in long-term copper demand. Exploration spending fell by more than 10 percent overall, including declines of around 45 percent in lithium and nickel exploration, although Asia Pacific recorded a 20 percent increase.
Mergers and acquisitions rebounded strongly in 2025, with overall deal value increasing 20 percent compared with 2024 as demand for high-quality copper assets accelerated. Venture capital investment also recovered, increasingly targeting artificial intelligence technologies that improve mineral exploration and extraction efficiency.
Governments significantly expanded financial support for critical mineral projects. Public finance commitments in advanced economies reached around USD 65 billion during 2025, more than four times higher than in 2023. However, the IEA noted that actual disbursement of funds remains essential to achieve meaningful supply diversification.
The agency also identified major imbalances across supply chains. Existing and planned rare earth refining capacity outside dominant suppliers equals about two-thirds of expected mined supply by 2035, while planned magnet manufacturing represents only one-third. Similarly, planned battery cathode production capacity is only about one-third of projected lithium mining capacity, highlighting the need for greater downstream investment.
The IEA identified gallium, magnet rare earths, yttrium, graphite, tungsten, tellurium, cobalt and germanium as among the most vulnerable minerals because of their high supply concentration, limited substitutes and strategic importance. Diversifying magnet rare earth supply chains alone would require around USD 60 billion in investment over the next decade.
Base metal smelters have also become strategically important because they recover numerous by-product minerals. However, the sector is under growing financial pressure. Benchmark copper smelter treatment charges fell to USD 0 per tonne during 2026, the lowest level ever agreed in annual negotiations, while spot charges have remained negative since 2024. Zinc and lead smelter fees have also turned negative. China accounted for more than 90 percent of global copper smelting capacity growth since 2005, increasing its global share from around 15 percent to 50 percent by 2025. Smelter utilisation rates have fallen below 70 percent outside China, compared with around 85 percent within China.
Developing refining projects outside dominant suppliers remains expensive. Capital costs are between 20 percent and over 150 percent higher, while operating costs average around 50 percent higher because of increased equipment, construction, feedstock and energy costs. The IEA recommends a combination of grants, concessional loans, equity participation, contracts for difference, loan guarantees, strategic reserves and diversified sourcing policies to strengthen investment.
The agency noted that critical minerals account for a relatively small share of final product prices despite their strategic importance. Minerals contribute about one-quarter of battery cell costs but only around 3 percent of the price of an average electric vehicle. Rare earths account for around 40 percent of permanent magnet costs but less than 1 percent of a vehicle’s value. Even tripling rare earth prices would increase vehicle prices by only 0.1 percent, while tripling battery material prices would raise electric vehicle and energy storage system prices by around 5 percent.
The IEA concluded that these additional costs represent a “mineral security premium” that governments, industry and consumers may need to share in order to build diversified, resilient and secure critical mineral supply chains capable of supporting the global clean energy transition.
SHAFANA FAZAL
