By Mehmet Enes Beşer
The emergence of China as the predominant supplier of critical minerals around the world represents an important factor influencing the current dynamics of global trade relations as well as economic and political issues linked to the transition to green technologies and advanced industries in many countries.
Implications of China’s Export Restrictions
The latest move of China’s leadership, related to export restrictions applied to critical minerals exported to the USA, represents an escalation in the technology-related trade conflict between China and other major countries. Specifically, in December 2024, export prohibitions were introduced for minerals such as antimony, gallium, and germanium. These restrictions represent the first case when China used its dominant position in supplying the USA with critical minerals as a means of influencing international trade policies and practices. These restrictions had significant economic consequences because antimony was an important mineral for the defense sector of the USA. China represents the largest producer of antimony in the world, providing the USA with 63% of the total volume. Importantly, the USA cannot produce antimony domestically. After introduction of these restrictions, the number of shipments of antimony decreased by 97%, and prices increased by nearly 200%. Such statistics highlight the degree of leverage China possesses due to the monopoly in supplying critical minerals.
Reactions and Responses to the Situation
The global community recognizes the urgent need to diversify supplies of critical minerals because China represents the sole dominant source. As one example, the USA launched several initiatives to increase domestic production of such minerals and find additional sources. However, such initiatives faced multiple challenges such as long and complex permitting processes and environmental opposition. The experience of Australia suggests that despite obvious economic benefits, such deals may be refused by the opposite side of negotiations. Specifically, the Australian government offered a deal to the USA according to which the latter receives antimony without imposing tariffs on imported steel and aluminum products in return for such supplies. However, the offer of Australia was refused by the US officials, indicating the complexities of negotiations on this issue.
The Larger Picture
The situation with China and critical minerals is more complex than simple international trade. China tries to exert political pressure on other nations in order to strengthen its position in the world. One case where it is evident can be the situation with the Democratic Republic of Congo (DRC), which is a rich deposit of lithium – one of critical minerals. As the USA intervened in the process of mining lithium in DRC by supporting AVZ against China-based mining company Zijin, it is clear that the control over minerals became part of the larger geopolitical agenda of all parties involved.
Given the growing competition between nations for critical minerals, it seems possible that in the future a resource security conflict may emerge among states because of this issue. Indeed, it can be mentioned that recently the USA has issued a couple of executive orders regarding mineral security, including the most controversial ones related to possible annexation of areas abundant with resources. Thus, one can see the significance of the issue, and the lengths governments are ready to go to in order to secure their access to resources.
Industrial and Economic Consequences
As far as industrial and economic aspects are concerned, it should be noted that China’s export policies create difficulties for companies that rely on critical minerals. The industries that face the greatest problems include information technology, energy, automotive, and defense sectors. As China implements export prohibitions and raises prices of antimony, tungsten, tellurium, molybdenum, and other minerals that play a vital role in the operations of many industries, these sectors suffer from supply chain issues.
According to American mining industry associations, China’s actions are referred to as “mineral extortion,” and there is a common opinion that significant changes in current policies are needed in order to increase domestic production of critical minerals. It is necessary to reform relevant legislation to speed up permit approvals.
Strategic Recommendations
There is no doubt that it is necessary to undertake certain steps in order to minimize the risks associated with China’s dominant position on the market for critical minerals:
1) Develop alternative suppliers of minerals, including domestic mining as well as partnering with other countries for finding new resources.
2) Invest in research and development activities in order to find substitutions for critical minerals, including creation of new materials in material sciences.
3) Create international coalitions aimed at implementation of a united critical mineral security policy.
4) Reform relevant regulations to simplify the process of developing mineral resources and mining operations.
5) Form critical mineral reserves to cope with unexpected situations.
Conclusion
China’s strategic approach in the matter of critical minerals implies serious risks for all other nations. The recent decision of the Chinese leadership demonstrates China’s leverage and the risks linked to this position. To address these threats successfully, there is a need to implement the above-mentioned strategies.