Critical Minerals: The New Geopolitical Imperative in Manufacturing (June 2025)

As the world accelerates towards a green and digital economy, the demand for critical minerals like lithium, cobalt, graphite, nickel, and rare earth elements is skyrocketing. These materials are indispensable for everything from EV batteries and wind turbines to semiconductors and advanced electronics. The International Energy Agency (IEA) projects that the energy sector's overall needs for critical minerals could increase by as much as six times by 2040, underscoring their profound importance. (IEA Critical Minerals Topic Page).

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Why Are Critical Minerals So Critical?

The "criticality" of a mineral is determined by its economic importance and the risk of supply disruption. Several factors contribute to this:

1.  Concentrated Supply Chains: The extraction and, particularly, the processing of many critical minerals are highly concentrated in a few geographic regions. For instance, China controls a dominant share of rare earth processing capacity and leads in midstream processing for cobalt, graphite, and nickel. This concentration creates significant geopolitical risks and supply vulnerabilities. (Prodensa Insight: Nearshoring Critical Minerals).

   
   

2. Soaring Demand from New Technologies: The energy transition and digitalization are driving unprecedented demand. An electric car, for example, requires six times more minerals than a conventional car, and a wind farm requires nine times more minerals than a natural gas power plant. (United Nations University).

   
   

3. Long Lead Times for New Mines: Developing new mining projects is a lengthy and complex process, making it difficult to rapidly increase supply in response to surging demand.

   
   

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The Global Response: Nearshoring and Supply Chain Diversification

The vulnerabilities exposed by recent global disruptions, combined with geopolitical tensions, have spurred a worldwide push for supply chain resilience and diversification. This is precisely where concepts like nearshoring and friendshoring come into play, particularly in regions like North America.

Countries are actively seeking to reduce their dependency on distant or politically unstable sources by:

• Relocating Processing Capacities: Bringing mineral processing and manufacturing of components (like battery cells) closer to end-use markets.

  
  

• Investing in Domestic/Allied Production: Governments and private entities are pouring investments into exploring, extracting, and processing critical minerals within their borders or in allied nations. The IEA's Global Critical Minerals Outlook 2025 highlights policy mechanisms to support diversification and innovations in mining, refining, and recycling. (IEA Global Critical Minerals Outlook 2025).

  
  

• Promoting Recycling and Circular Economy: Scaling up critical mineral recycling could significantly reduce the need for new mining, potentially cutting new mine development needs by 25% to 40% by mid-century for key battery metals. (IEA Critical Minerals Topic Page).

  
  

• Developing Traceability Systems: Ensuring transparency in supply chains to verify responsible sourcing and adherence to environmental, social, and governance (ESG) standards. (OECD Report: The role of traceability in critical mineral supply chains).

  

  These percentages are based on the mineral weight in an average battery and may vary depending on the specific NMC chemistry used (e.g., NMC111, NMC532, NMC622, NMC811).

  
  

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Impact on Manufacturing Sector

For manufacturing businesses, the focus on critical minerals has several implications:

• Cost Volatility: Raw material inputs now account for a significant portion of battery costs, and price fluctuations in minerals like lithium or nickel can directly impact production expenses. (Prodensa Insight: Nearshoring Critical Minerals).

  
  

• Design and Innovation: Manufacturers are increasingly exploring alternative materials, optimizing designs to use fewer critical minerals, or designing products for easier recycling.

  
  

• Strategic Sourcing: Companies are re-evaluating their sourcing strategies, prioritizing suppliers with robust, diversified, and transparent critical mineral supply chains. This includes looking for partners in regions like Latin America, which holds significant reserves of lithium, copper, nickel, and graphite. (CEPAL: Critical minerals for the energy transition and electromobility).

  
  

• ESG Compliance: The demand for responsibly sourced minerals is growing, pushing manufacturers to ensure their supply chains adhere to strict environmental and social governance standards.

  
  

  

  
  

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Looking Ahead: Securing the Future

The critical minerals landscape is dynamic and complex. Securing a reliable and sustainable supply is not just an economic necessity, but a matter of national security and industrial competitiveness for all nations. For manufacturing hubs, understanding these dynamics, engaging with efforts to diversify supply chains, and embracing responsible sourcing practices will be paramount for long-term success in the evolving global economy. The drive for critical minerals will continue to shape investment, innovation, and international cooperation in the years to come.