What's Happening?
The International Energy Agency (IEA) has reported a 9% decline in investment for critical minerals in 2025, despite rising demand. The IEA's Global Critical Minerals Outlook 2026 highlights a significant drop in exploration spending, which has hollowed
out the early stages of the project pipeline. While governments have increased public finance commitments, private capital has retreated, creating a confidence gap. The report emphasizes the vulnerability of supply chains due to China's dominance in rare earth mining and refining, controlling 60% of mining output and over 90% of refining capacity. By 2035, refining capacity is expected to cover only 66% of mine output, underscoring the need for diversification.
Why It's Important?
The decline in investment and exploration spending poses a threat to the stability of supply chains for critical minerals, which are essential for various industries, including automotive and high-tech sectors. The reliance on China for rare earths and other critical minerals creates a dependency that could lead to significant disruptions if export controls are enforced. The report suggests that without diversification in refining capabilities, supply chain security remains at risk. The potential bottlenecks in 2035 highlight the urgency for investment decisions to be made now to ensure future supply chain resilience.
What's Next?
The IEA calls for immediate investment in refining infrastructure to address the projected shortfall in capacity. The construction of refineries, which can take five to ten years, needs to begin promptly to meet future demand. The report also suggests that the cost of diversification is smaller than perceived, representing only a small fraction of the average electric vehicle's retail price. As the demand for critical minerals continues to grow, strategic investments and policy measures will be essential to mitigate supply chain vulnerabilities and ensure economic security.
