Rush for essential minerals in demand
In a rapidly evolving global economy, the race for critical minerals such as rare-earth metals, cobalt, and uranium is intensifying. According to the International Energy Agency, demand for these minerals is expected to quadruple by 2040 for use in clean-energy technologies alone. This surge in demand has placed a significant spotlight on the management of these resources, particularly in mineral-rich countries.
China, a global leader in the refining and processing of critical minerals, holds an estimated 60-80% market share. This dominance poses significant challenges to the development of resource-rich countries. By suppressing prices, reducing tax revenues, and enabling geopolitical leverage through export restrictions, China's control over critical minerals can limit the economic benefits of mineral wealth.
Rabah Arezki, Director of Research at the French National Center for Scientific Research and a senior fellow at Harvard Kennedy School, emphasizes the importance of strong inward-facing institutions for delivering adequate investment in diamond cutting capabilities and other domestic processing activities. Similarly, Rick van der Ploeg, Professor of Economics at the University of Oxford and University Professor of Environmental Economics at the University of Amsterdam, stresses the need for resource-rich countries to focus on strengthening institutions to make the most of their endowments.
One example of a country taking steps to manage its critical mineral resources is Botswana, which has sought to ensure that diamond cutting, not just mining, occurs domestically after acquiring a 15% stake in De Beers. Another instance is the European Union, which has sought mining contracts in resource-rich countries like the Democratic Republic of the Congo (DRC).
To counter China's dominance, potential solutions for fair resource management include diversifying supply chains, investing in local processing capacity, enforcing environmental and governance standards, and forming strategic international agreements to secure stable, transparent, and ethical mineral trade. Boycotts of critical minerals coming from conflict zones or countries using forced labor could also influence multinationals and foreign governments to demand better enforcement of environmental and social standards.
In conclusion, China’s dominance in critical mineral markets deeply affects resource-rich countries by distorting prices, undermining revenue, and wielding leverage over global supply chains. Fair resource management requires coordinated international efforts to diversify supply, enforce high environmental and governance standards, and invest in local capacity building to reduce overreliance on any single actor, particularly China.
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