The Critical State Of Critical Minerals

Feature Stories | 1:39 PM

China’s dominance of critical mineral refining has led to a global scramble to satisfy demand from energy transition, EVs, AI, data centres and much more.

• Only China possesses the capacity to process rare earths into metals and magnets at scale
• The rest of the world is scrambling to diversify supply
• Australia has deals with the US, EU and Japan
• Iran War increasing cost pressures for Australian critical minerals producers

By Greg Peel

It’s April Fools Day in the US and as I write, Artemis II has just left Florida for the first trip to the moon since 1972, albeit only around it.

The first landings since Apollo are scheduled for 2028. And, supposedly, Mars is next.

This is all very momentous, but at a lesser scale Morgan Stanley points out in 2025 there were 330 orbital launch attempts, up 26% year on year.

With the proliferation of rockets, the UN Office for Outer Space Affairs estimates the cumulative number of objects launched into outer space increased 136% between 2020 and 2025.

If companies and governments aim to build at scale in space, they will require numerous specialty alloys and highly engineered metals, Morgan Stanley notes.

The challenge is not simply demand, but supply. Many of the materials critical to rockets and spacecraft are already subject to tight, concentrated, or geopolitically sensitive supply chains.

As launch activity accelerates, metals could emerge as a meaningful bottleneck to the industry’s broader ambitions.

The critical constraint will be securing the materials required to build rockets and spacecraft. A meaningful share of those inputs are metals that already face significant supply limitations.

Morgan Stanley estimates spacecraft launched in 2025 required approximately 7,000 metric tons of metals.

While modest in the context of total global metal demand, spacecraft rely on highly specialised materials and alloys engineered to withstand extreme heat, stress, and radiation -- often at costs reaching tens of thousands of dollars per tonne or more.

For many of these metals, production is concentrated in a single country, operationally complex, environmentally or toxicologically challenging, and/or fundamentally constrained by natural scarcity.

While stargazing is all very well, back here on earth, there is a lot more to terrestrial demand globally for critical minerals.

One problem is the dominance of a single country.

China

The core of the critical minerals crisis is not geological scarcity, but industrial concentration, suggests research published by Deutsche Bank Research Institute.

China's capacity to exert geopolitical influence through its critical minerals sector in 2025 stems directly from its decades-long effort to industrialise its critical minerals supply chains.

Today, only China possesses the capacity to process rare earths into high-purity oxides, metals and magnets at scale. The dependency is stark: the US and the EU import a respective 71% and 46% of their rare earths from China, and the US imports 100% of its heavy rare earths from China. 

Thus, the scale and impact of Beijing’s dominance over critical minerals is a clear assertion of infrastructure realism, Deutsche believes.

By establishing and scaling its control over this foundational layer of the physical economy, China has gained a powerful tool to shape outcomes and advance its economic priorities.

China’s latest strategic move amidst tensions over Taiwan exemplify this, with Beijing restricting “dual use” rare earth magnets and critical minerals to 20 Japanese companies in February.

As a side note, in March Australia’s leading rare earths producer Lynas Rare Earths ((LYC)) extended its existing Japan Australia Rare Earths agreement to 2038.

The extended agreement allows for deliveries of up to 7200tpa of neodymium-praseodymium (NdPr) with firm commitments of 5000tpa, an agreed market-linked floor of US$110/kg, and a 30% profit share at prices over US$150/kg.

Rare earths are integral components vital for defence systems, electric vehicles, power grids and data centres, Deutsche Bank notes.

Concerns that China could use its rare earth dominance as political leverage are not new. Back in 2010, for example, Japan faced shortages and price spikes after a halt in shipments from China led many to link the event to a preceding diplomatic clash.

Furthermore, critical mineral self-sufficiency has been many countries’ longstanding priority for decades (in particular Europe’s), especially as part of their goal towards a net-zero energy transition.

Yet, rare earths are only one group in minerals in a larger group deemed “critical”.

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