Sustainable Supply Chains for the Energy Transition – Background

The production and mining of critical raw materials are concentrated in a few countries that possess rich geological deposits. For instance, China dominates the production of rare earth elements, accounting for a substantial portion of the global supply. Similarly, Australia and Chile are major producers of lithium, while the Democratic Republic of Congo is a leading source of cobalt. These countries have the potential to benefit from their abundant natural resources, which enable them to control a significant share of the global market – but also could face challenges with human rights, environmental degradation and social unrest due to inequality, that often accompany natural resource extraction in developing countries. An approach to trade that addresses these issues would help promote the beneficial effects while mitigating adverse effects.

For many raw materials, China is a key player with refining and processing capacities far exceeding those of other countries. Other countries have managed to carve out niches for specific materials refining, such as Indonesia with its nickel industry, by banning raw nickel exports. This concentration of refining capacity in specific regions creates dependencies for other countries that rely on imported refined materials for their industries.

The graphic below shows how single countries dominate certain raw materials’ production as a share of the total global production.