The Critical Minerals Institute defines a critical mineral as one where production is dominated by one or two countries. In its latest critical minerals watchlist, it refers to supply concentration as the defining risk factor in modern mineral markets and cautions that the acceleration of deal-making in critical minerals is, at times, outpacing rigorous technical due diligence.

In a sector where geological complexity, processing capability and operational expertise are decisive, such gaps can carry significant implications for project outcomes and investor confidence.

In a recent paper, FTI Consulting advised companies that are consumers of critical minerals to consider how new trade dynamics could impact sourcing and supply and ensure they are well positioned to minimise supply chain risks and capitalise on opportunities.

Processed critical minerals – including rare earth elements, cobalt, nickel and other elements vital to advanced technologies – are essential inputs across critical infrastructure sectors from defence and communications to energy and transportation. They underpin advanced weapons systems, battery technologies, fibre-optic networks and a wide range of industrial and consumer applications.

Charlotte, North Carolina-based battery recycling materials and management company, Cirba Solutions, has taken a proactive approach to sourcing the minerals its requires, explains Chief Financial Officer, Claire Zirkelbach.

“When we think about critical minerals like lithium, nickel and cobalt – key components of common battery chemistries – it isn’t as much about it being difficult to access as ensuring that our sourcing is diversified enough,” she explains.

Supply is highly concentrated in a handful of regions (cobalt in the DRC, lithium in Australia, Chile and China, nickel in Indonesia), creating exposure to trade disruptions and price volatility, while demand continues to surge across industries, including energy storage, electronics and defence systems.

“Securing high quality minerals for batteries is vital for new products and that dynamic makes diversification of supply the central issue,” adds Zirkelbach. “A holistic strategy that incorporates both virgin and recycled content is key to strengthening access and long-term stability.”

Recycled materials recovered from manufacturing scrap, end-of-life batteries and electronics provide a complementary, often more localised supply stream that can reduce dependence on primary extraction, shorten supply chains and offer a buffer against market fluctuations.

Closed-loop systems that include collection systems and partnerships with battery recycling infrastructure help to capture those materials already in circulation, effectively turning waste into a strategic resource and reinforcing a more resilient and secure critical minerals supply chain.

Zirkelbach observes that critical minerals are at the centre of the global energy transition, electronics demand and defence applications and because pricing can swing sharply over short periods, volatility in pricing is something that needs to be considered.

“In today’s landscape, where a handful of regions dominate the processing and refining of critical minerals, it gives more supply chain control to those regions,” she says. “Therefore, when those regions are impacted it has the potential to impact the global supply chain and affect pricing. Domestic recycling, processing and refinement can act as a stabilising force.”

To enhance domestic supply chains, it is crucial to diversify sourcing and battery recycling offers a pathway to achieve that. Recycled or secondary content is anticipated to support a higher proportion of critical mineral demand in the future.

“For example, Fastmarkets reports that in 2026, 8% of global battery metal supply will come from battery recycling and access to this content is only growing,” says Zirkelbach. “While the International Energy Agency predicts that lithium and copper will face supply deficits of 40% and 30% respectively by 2035, secondary content can help close this gap because these types of recycled battery materials can be used over and over again.”

She adds that strategies such as long-term partnerships and agreements with recycled sourcing provide a proactive way to enhance access to the required materials.

Ivan Murphy, Executive Chairman, Harena Rare Earths refers to a massive shortage of the minerals required to make magnets, which are key components in robotics in particular.

“China controls literally 95% of these minerals so if you need them, you are either getting them from China or paying a massive premium elsewhere,” he says. “This has led the US to focus on potential direct investment in projects such as ours to give it more control of the minerals it needs for its robotics strategy.”

Harena Rare Earths is currently in discussions with the Development Finance Corporation, the international investment arm of the US government.

One of the reasons for China’s dominance of the rare earths market is that in addition to its own reserves, it has acquired production facilities in Africa from which minerals are shipped back to China for refining.

“This level of control has made pricing very difficult and encouraged the US government to introduce floor pricing for the only rare earth mine in that country and make a huge investment in it,” observes Murphy. “But even within that opportunity for MP Materials, the majority of what it produces in California is light rare earths.”

The upside for producers is that customers are supply sensitive rather than price sensitive, which is clearly good news for companies such as Harena Rare Earths – especially with the UK forming its own critical minerals strategy designed to secure supply chains by boosting domestic capability in a way that generates new jobs and wealth, attracts investment and plays a leading role in solving global challenges with international partners.

When asked what customers can do to improve their access to the minerals they need, Murphy explains that purchasing power is directly connected to scale.

“Outside of heavy rare earths, supply is challenging but not as tight,” he says. “However, if I was in a treasury position I would be looking to try and lock in supply at whatever prices I could get if I could get a commitment to longer-term arrangement. I wouldn’t want to try to be too clever with my supply if I really needed it for production.”

Critical minerals are extracted in different countries depending on their type and the mines are often owned by foreign companies from countries such as the US or China, explains Juliette Fortin, Senior Managing Director in the economic consulting segment at FTI Consulting.

However, most of the processing takes place in China, leading to a strong geographical concentration in this market.

“The most difficult critical minerals to access are rare earths,” she agrees. “China accounts for 90% of global rare earth refining capacity. In addition, amid escalating trade tensions between the US and China, the latter introduced export restrictions on seven rare earth elements in April 2025, which directly impacted their availability. These restrictions were eased in July 2025, but new ones were introduced in 2026, targeting dual-use items heading to Japan.”

A number of global manufacturers, particularly in the automotive and high-tech sectors, faced production disruptions and temporary shutdowns as a result of last year’s export restrictions. Ford Motor Company briefly shut down the Explorer SUV assembly line at its Chicago plant due to shortages of rare earth magnets, while Suzuki Motor Corporation suspended production of the Swift model in Europe because of the curb on rare earth materials.

The high concentration in the market creates a high risk of disruption of the supply chain, translating into increased price volatility, adds Fortin.

“Supply-demand imbalances also impact volatility, with global demand responding to the energy transition,” she says. “Rare earth prices have been highly volatile since 2019, with a peak in early 2022 driven by post-COVID demand, rapid EV and battery growth as well as Ukraine war recovery.” Supply growth for battery metals (lithium, nickel, cobalt, graphite and manganese) stabilised prices in 2024 and early 2025, until China’s export restrictions in April 2025.

According to Fortin, recent data points to a surge in critical mineral prices in early 2026, potentially coming from supply shocks with export restrictions and stockpiling policies from countries trying to mitigate risks of geographical concentration.

“To reduce risks of disruption related to high geographical concentration, companies should diversify their sources of supply, as much as possible,” she says. “More generally, they can improve transparency and traceability through due diligence to identify risks, develop scenario planning and stress test to anticipate potential market shocks (shipping delays, processing, price spikes) and set up contractual agreements with volumes delivery commitments.”

In addition to geopolitically restricted supply, factors affecting access to critical minerals include the significant risk in committing significant long-term capital in multiple different jurisdictions, the concentration of certain minerals, lengthy permitting and development timeframes in western countries and limited processing capacity outside of China.

Denis Clement, CEO, Critical Minerals Americas describes the latter as a major bottleneck for western supply chain development, particularly for lithium, cobalt and rare earth elements.

“Strategic minerals are prone to greater price vulnerability than other commodities such as oil or natural gas,” he says. “An example is lithium, which rose in the early 2020s and then more or less collapsed in 2023. Cobalt is subject to factors such as export bans and inventory releases out of DRC.”

Clement refers to continuity of supply as a matter of national security and urgency and outlines a number of developments that would improve access.

“Projects under development must have the scale to meet demand – large scale domestic resources would provide for multi-decade supply of critical minerals and rare earth elements,” he says.

Clement also recommends investing in domestic processing and extraction, using flexible technologies such as bioleaching and hydrometallurgy and developing facilities capable of processing many different types of minerals.

“Integrated processing and bioleaching would provide for on-site extraction with lower energy requirements, reducing reliance on expensive capital and environmentally unpopular smelting and foreign refining,” he adds. “It can take 15-20 years to put a mining project into production so focusing on projects that are relatively advanced can accelerate access to sources of supply.”

Anthony Hall, CEO and Managing Director, Osmond Resources notes that of the two main producers of rare earths in addition to China – MP Materials in California and Lynas in Western Australia – the former’s production will ultimately end up in the US, while roughly half of the output from Lynas is contracted to Japan and the other half to the US.

“Rare earths are very challenging as a ‘primary’ given existing producers have very high grade deposits and are currently high-grading their mining operations – for example, MP is mining 8.55% TREO, which is significantly higher than any developer,” he explains.

TREO or total rare earth oxide represents the sum of heavy and light rare earth oxides in a mining project and acts as a crucial metric for evaluating rare earth element deposits.

“Current pricing levels are very hard for primary developers, which suggests pricing signals need to improve,” says Hall. “An alternative approach is to focus on by-product developers that potentially end up with massive scale rare earths for a negative cash cost.”

For the more challenging critical minerals such as zircon and hafnium, Hall says end users will need to start choosing which developers to back as that will be the only way to secure supply, adding that the rare earth market is a good case study as all known supply is already spoken for.

The most constrained minerals are those where supply chains are concentrated at the refining stage and where new supply faces long development timelines. Rare earth elements, particularly magnet metals like neodymium and praseodymium, as well as heavy rare earths such as yttrium and terbium fall into that category, given the dominance of Chinese processing capacity.

“Lithium remains constrained as well, not because of resource scarcity but because bringing new, high quality supply online takes time and capital,” observes Tony Sage, Chairman and CEO of Critical Metals Corp. “Gallium is also worth noting as China controls the vast majority of global supply and has demonstrated a willingness to restrict exports.”

He suggests the key question for western markets now is not just where supply comes from but what solutions are in place to build more resilient supply chains. The strategic value isn’t just in the resource itself – it is in developing assets that can serve as part of a broader, secure and scalable supply solution aligned with western demand.

“Volatility is inherent in the sector,” adds Sage. “Lithium is a good example – prices rose sharply and then corrected by more than 70% in a relatively short period. Similar cycles have played out across nickel, cobalt and other critical metals. From our perspective, that reinforces the need to focus on long-term fundamentals rather than short-term price cycles.”

Demand driven by electrification, energy transition and defence applications continues to grow. Sage reckons the solution is not to chase pricing cycles but to advance high quality assets that remain competitive across cycles. That means prioritising resource quality, favourable jurisdictions and proximity to end markets so that projects are economically viable and strategically relevant through the full commodity cycle.

“Ensuring continuity of supply requires a multi-layered strategy,” he says. “First, diversification geographically and across assets is critical to reduce reliance on any single region. Second, companies need to invest not just in mining but in downstream processing and refining capacity, where many of the current bottlenecks exist. Third, long-term partnerships and offtake agreements with end users are becoming increasingly important to de-risk development.”

More broadly, Sage recommends moving towards integrated supply solutions, linking resource development, processing and end-market demand. “Ultimately, the companies that succeed will be those that can deliver not just resources but reliable, scalable and geopolitically secure supply solutions.”

Virginia Martin Heriz, Global Coordinator of Sustainable Investing Research at J.P. Morgan refers to trade relationships as one of the factors that the future of the critical mineral sector depends on, adding that demand from green energy, AI and defence companies will drive continued growth.

“Reinvigorated focus on mining and refining will be necessary to support industry ambition,” she concludes.