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It’s the Processing, Stupid? The Critical Mineral Supply Chain Challenge Visualized

They say a picture is worth a thousand words.

Screen Shot 2022-01-25 at 1.56.47 PM

This Visual Capitalist graphic may not exactly qualify as a picture – but is certainly reveals a lot about the complexity and urgency of the West’s critical mineral woes, and underscores how China has managed to corner the strategic and clean energy materials supply chain especially when it comes to processing.

According to the graphic, China has the edge when it comes to producing Rare Earths, currently accounting for 60 percent of global production.  China also produces 13 percent of global lithium supplies – another key material underpinning the green energy transition.  However, it is the processing segment of the supply chain where China has systematically established firm grip and has attained a startling level of control, accounting for 35 percent of global nickel refining, 58 percent of lithium refining, 65 percent of cobalt refining, and a whopping 87% of global REE refining. Expressed a little flippantly, it’s the processing, stupid.

The chart must be viewed against the backdrop of the accelerating global push towards carbon neutrality, evidenced most recently by electric vehicle sales outpacing diesel car sales in Europe for the first time in history.

In light of the growing urgency to secure critical mineral supply chains, the United States’ notable absence from the Visual Capitalist chart should give pause to stakeholders.

As National Mining Association president and CEO Rich Nolan argued in a November 2021 op-ed, while the United States still has a shot at winning the EV revolution, it is currently not only not in the lead, but is “being lapped” by China.

Benchmark Mineral Intelligence data shows that while battery megafactories have gone mainstream, with 225 plants in the pipeline as of August 2021.  While the U.S. is no longer a bystander in this race, only very few megafactories are currently located in the United States.

To succeed in this environment, Benchmark Mineral Intelligence’s Simon Moores says stakeholders will need to understand the lithium-ion-to-EV supply chain, its individual sections, and the linkage between them:

“Automakers who quickly understand the importance of these linked steps in the battery supply chain to the quality and cost of their EVs will be the most successful at navigating the next decade. 

For governments, the shifts in the economics of the supply chain […] provide opportunities to create jobs, garner influence over a strategic industry, and establish new trading relationships, particularly relevant as Europe and the United States, under a Biden presidency, will seek to reduce reliance on China as a single point in the supply chain.”

While first steps to strengthen supply chains have been taken (refer to our comprehensive Year in Review post from December 2021) and stakeholders are increasingly realizing the severity of the problem we’re facing, many have yet to fully embrace a comprehensive “all-of-the-above” strategy to secure our supply chains.

What we outlined in December of last year remains true today:

“The challenge is too large to address piecemeal. While recycling, substitution, and partnering with allies should be part of any overall comprehensive strategy, strengthening domestic mineral resource development across the entire value chain must be a key focal point of our efforts if we want to ensure reliable access to the critical minerals we need to meet our current and future needs.”

China will certainly not wait for us to catch up.