Critical Minerals: The Race for Lithium, Cobalt and Rare Earths

Critical minerals are the raw materials that modern economies cannot easily do without and cannot easily source. Lithium, cobalt and rare earths are the best known, because they go into electric vehicle batteries, wind turbine magnets and phones. This explainer sets out what makes a mineral "critical", who produces and refines these three, how prices and export rules have shifted since 2023, and what India and other governments are doing about it. Facts are dated; analysis is labelled as such.

Critical minerals are often compared with oil, but the comparison only goes so far. These markets are much smaller, the bottleneck is often refining rather than mining, and one country's policy decision can move world prices.

What makes a mineral "critical"?

There is no single global list, but most governments use two tests. The European Commission defines critical raw materials as those combining high economic importance (what the material is used for and how easily it can be substituted) with high supply risk (how concentrated production is, the governance of producing countries and trade factors). The lists differ:

India's list, according to India Briefing's summary of the Ministry of Mines report, includes lithium, cobalt, nickel, graphite, copper, rare earth elements, gallium, germanium, tungsten and titanium among its 30 entries, and reports India's net import reliance for lithium, cobalt and nickel as 100% in 2020. The PIB backgrounder on the National Critical Mineral Mission (April 2025) explains that placing 24 of them in Part D gives the Centre exclusive authority to auction their mining leases. The US figure is from the final 2025 USGS list, as recorded by the IEA.

What they are used for

• Lithium is overwhelmingly a battery metal. The USGS estimated global end uses as 88% batteries, 4% ceramics and glass, 2% lubricating greases and the rest in smaller uses.
• Cobalt is used mainly in lithium-ion battery cathodes globally, and in superalloys for jet engines. The USGS notes that the cobalt content of batteries was being reduced, and that cobalt-free iron-phosphate chemistries held significant market share in China. The IEA's 2025 Outlook said these LFP batteries covered nearly half the electric car market, up from under 10% in 2020.
• Rare earths are the lanthanide elements plus yttrium (and, in some definitions, scandium). Their leading global use is magnets, according to the USGS, with other uses in catalysts, batteries, ceramics, glass and polishing. The PIB backgrounder notes that dysprosium and neodymium are used in the permanent magnets of wind turbines.
• Gallium and germanium are used in electronics and fibre optics, and graphite anodes are an essential component of lithium-ion batteries, as FTI Consulting's analysis of China's export controls notes.

Battery chemistry choices feed back into mineral demand (see our piece on solid-state batteries and global transit infrastructure), and gallium and germanium link this story to chips, covered in our explainer on semiconductor supply chains and geopolitics.

Who mines them: production in 2025

Figures below are estimates from the US Geological Survey's Mineral Commodity Summaries 2026, published in February 2026.

Cobalt mining is dominated by the Democratic Republic of the Congo. Lithium is more diversified: Australia mines hard rock, Chile and Argentina produce from brine, and Zimbabwe and Mali grew quickly. China mines roughly two-thirds of the world's rare earths. India produced an estimated 2,900 tonnes of rare earths in 2025, and the PIB backgrounder reports that the Department of Atomic Energy found around 1,11,845 tonnes of in-situ rare earth oxide in Balotra, Rajasthan.

Who refines them: the real bottleneck

Ore has to be turned into battery-grade chemicals, separated oxides or metals, and that is where concentration is highest. The IEA's Global Critical Minerals Outlook 2025 reported that:

• For 20 energy-related strategic minerals, China was the dominant refiner for 19, with an average market share of around 70%.
• The average share of the top three refining countries for key energy minerals rose from about 82% in 2020 to 86% in 2024.
• Around 90% of refining supply growth came from the top single supplier: Indonesia for nickel, and China for cobalt, graphite and rare earths.

The 2026 Outlook, released in July 2026, found the top refining country's average share (excluding rare earths) rose to 72% in 2025 from 70% in 2023.

A country can mine very little of a mineral and still control its supply, if it does most of the refining.

Demand, prices and the boom-bust cycle

Demand has grown fast, but prices have swung far more than demand. Key data points, each with its year:

The IEA's 2025 Outlook said lithium prices rose eightfold in 2021–22 and then fell by over 80% from 2023, while battery metal supply grew at twice the rate of the late 2010s. Low prices then hit investment: the 2026 Outlook reports that critical mineral investment fell 9% in 2025 and lithium companies cut investment by around 40%. The IEA attributes most of the cobalt price rebound to DRC export restrictions.

Looking ahead, the 2026 Outlook projects lithium supply deficits through 2035, a new cobalt supply gap because of the DRC quota, and a 25% copper shortfall by 2035. These are scenario projections, not forecasts.

Export controls: a timeline

Concentration became a policy issue when producing countries began restricting exports. The main measures, with dates, are below.

According to the IEA's 2026 Outlook, the number of mineral tariff codes under Chinese export controls has tripled since 2023, and full implementation of the expanded rare earth controls would put around USD 6.5 trillion a year of downstream production outside China at high risk. In Europe, gallium and heavy rare earths cost about five times Chinese domestic prices. Restrictions are not unique to China: the IEA also lists Zimbabwe's lithium and Mozambique's graphite measures.

How governments are responding

European Union

The EU's Critical Raw Materials Act sets 2030 benchmarks for strategic raw materials: domestic extraction of at least 10% of annual EU consumption, processing of at least 40% and recycling of at least 25%, with no more than 65% of any strategic raw material coming from a single third country. Strategic projects get faster permitting, capped at 27 months for extraction and 15 months for processing and recycling. The Commission selected its first 47 strategic projects in March 2025, covering 14 of the 17 strategic raw materials, and adopted a second list on 9 October 2026.

United States

The US expanded its critical minerals list from 50 to 60 in November 2025. The USGS records that in 2025 the US published a solicitation to buy 7,480 tonnes of cobalt over five years for the National Defense Stockpile, which was cancelled before the end of the year.

The cost of diversifying

The IEA's 2026 Outlook reports that public finance commitments by advanced economies for critical minerals reached around USD 65 billion in 2025, more than four times the 2023 level. It estimates that diversifying magnet rare earth supply alone would need around USD 60 billion over a decade, and that refining projects outside the dominant supplier face capital costs 20% to over 150% higher.

India's approach

National Critical Mineral Mission

The Union Cabinet approved the National Critical Mineral Mission in January 2025, with government expenditure of ₹16,300 crore and expected investment of ₹18,000 crore by PSUs and others, a combined ₹34,300 crore over seven years. It covers the value chain from exploration to recycling, with a fast-track approval process, a domestic stockpile, processing parks and support for acquiring assets abroad.

The PIB backgrounder lists the mission's targets for 2024-25 to 2030-31:

Block auctions

Since the MMDR Act was amended in 2023, the Ministry of Mines has auctioned critical mineral blocks in tranches. After the seventh tranche, All India Radio reported in June 2026 that 56 of the 88 blocks offered had been successfully auctioned, a success rate of over 63%, with the latest round covering graphite, rare earths, vanadium, titanium, glauconite and rock phosphate. An eighth tranche of 20 blocks across nine States was launched in July 2026, with bids due by 21 September 2026. A successful auction is the start of a long process; it does not mean a mine is producing.

KABIL and overseas assets

Khanij Bidesh India Ltd (KABIL), a joint venture under the Ministry of Mines, signed an agreement with CAMYEN SE, a state-owned company in Catamarca, Argentina, on 15 January 2024 for lithium exploration over about 15,703 hectares, according to the PIB backgrounder. It also signed an MoU with Australia's Critical Minerals Office in March 2022.

Rare earth permanent magnet scheme

On 26 November 2025, the Cabinet approved a ₹7,280 crore Scheme to Promote Manufacturing of Sintered Rare Earth Permanent Magnets. It aims to create 6,000 tonnes a year of integrated magnet manufacturing capacity, allotted to five beneficiaries through global competitive bidding, with up to 1,200 tonnes a year each. The scheme runs for seven years from the award, including two years to build facilities and five years of incentives linked to sales. All India Radio notes that India's magnet demand is met mainly through imports and is expected to double by 2030.

The ESG question: artisanal cobalt

The environmental, social and governance problems of critical minerals are most documented for cobalt. In January 2016, Amnesty International and African Resources Watch (Afrewatch) published research on artisanal cobalt mining in the DRC. As reported by the Guardian and republished by the Business and Human Rights Resource Centre, the groups interviewed 90 adults and children at five artisanal mine sites, found children as young as seven working, and recorded miners reporting 12-hour days without protective equipment for about a dollar a day. They traced cobalt to batteries sold by 16 multinational brands. That research is now a decade old, and conditions may have changed. Company disclosure has improved: the IEA's 2025 Outlook found that about 85% of 25 major mining companies disclosed performance on 10 key sustainability indicators in 2023, up from 60% in 2020.

Analysis: what remains uncertain

The following points are interpretation, not established fact.

• Will buyers pay for diversification? Non-Chinese refining costs far more. Whether buyers or governments keep paying that premium if prices fall again is an open question.
• Will technology change demand? Lower-cobalt and cobalt-free batteries have already cut cobalt use per battery. Further chemistry changes and recycling could shift demand again.
• How permanent are export controls? China suspended some rare earth controls within weeks, and the DRC moved from a ban to quotas. Rules that change this quickly make long-term planning harder for manufacturers.
• Can India move from auctions to output? The mission's targets cover exploration, auctions and processing capacity. The real test is domestic production and refining, and there is little public data on that yet.

Mineral policy also overlaps with climate policy, covered in our explainer on carbon markets and carbon credits.

The bottom line

Critical minerals matter less because they are scarce in the ground and more because mining and especially refining are concentrated in a few countries. Since 2023 that concentration has been used as leverage, through China's controls on gallium, germanium, graphite and rare earths and the DRC's cobalt quotas. Prices have swung from boom to bust and back. The EU, the US, India and others are responding with lists, subsidies, stockpiles and auctions, but the IEA's data shows that building alternative supply is slow and expensive. For India, the National Critical Mineral Mission and the magnet scheme are the main tools to watch, and the test will be production, not announcements.

Frequently asked questions

Are rare earths actually rare?

Not especially. The USGS says rare earths are relatively abundant in the Earth's crust, but concentrations that can be mined economically are less common than for most minerals, and separating them is complex.

Does India produce lithium?

The USGS 2026 summary does not list India among lithium-producing countries for 2025. India relies on imports, and KABIL is exploring lithium in Argentina, while domestic exploration is under way through the National Critical Mineral Mission.

Is the critical minerals list fixed?

No. Lists are reviewed periodically. The US added 10 minerals in 2025, the EU publishes a new list every few years, and India's expert committee recommended a Centre of Excellence on Critical Minerals to update its list regularly.

Sources

1. Global Critical Minerals Outlook 2026: Executive summary, International Energy Agency, 2026.
2. Global Critical Minerals Outlook 2025: Executive summary, International Energy Agency, 2025.
3. Mineral Commodity Summaries 2026: Lithium, US Geological Survey, 2026.
4. Mineral Commodity Summaries 2026: Cobalt, US Geological Survey, 2026.
5. Mineral Commodity Summaries 2026: Rare Earths, US Geological Survey, 2026.
6. Final List of Critical Minerals 2025 (United States), IEA Policies Database, accessed 2026.
7. Critical raw materials, European Commission, accessed 2026.
8. Critical Raw Materials Act, European Commission, accessed 2026.
9. EU selects 47 strategic projects to enhance raw material security, European Commission Transition Pathways, 2025.
10. Strategic projects under the CRMA, European Commission, accessed 2026.
11. China's Export Controls on Critical Minerals: Gallium, Germanium and Graphite, FTI Consulting, 2023.
12. Cabinet approves National Critical Mineral Mission with an outlay of Rs 34,300 crore over seven years, Prime Minister's Office (PMIndia), 2025.
13. National Critical Mineral Mission: Powering India's Clean Energy Future, Press Information Bureau Research Unit (Ministry of Mines), 2025.
14. India Identifies List of 30 Critical Minerals, India Briefing, 2023.
15. Ministry of Mines auctions 10 critical mineral blocks under 7th tranche, All India Radio News, 2026.
16. Launch of the eighth tranche of auction of 20 critical and strategic mineral blocks, AL Circle (Ministry of Mines press release), 2026.
17. Cabinet approves rare earth magnet manufacturing scheme, All India Radio News, 2025.
18. Cabinet approves Rs 7,280 crore scheme to promote manufacturing of rare earth magnets, The Tribune, 2025.
19. Children as young as seven mining cobalt used in smartphones, says Amnesty, The Guardian via Business and Human Rights Resource Centre, 2016.