Understanding the system behind critical raw materials supply

Critical raw materials (CRM), also known as critical minerals, are central to the energy transition, digitalisation, and defence. They underpin emerging technologies and industrial strategies, yet their supply is shaped by far more than resource endowment or market demand. Unlike bulk commodities, CRM sit at the intersection of industrial policy, geopolitics, environmental constraints, and complex global value chains. Understanding these materials requires understanding the system within which they are produced, processed, financed, and traded.

 

The urgency of that understanding has intensified sharply. In 2025, China escalated its use of export controls on critical minerals, extending restrictions to rare earths, tungsten, and permanent magnet manufacturing equipment, and for the first time codifying categorical denials for defence-related end use, with implementation suspended until November 2026. The European Union's Critical Raw Materials Act, which entered into force in May 2024, has begun designating strategic projects, with 47 EU-based and 13 non-EU-based projects selected in its first round and a second selection round launched in January 2026, according to the European Commission. In the United States, the Trump Administration has shifted critical minerals policy toward direct federal equity investments, strategic stockpiling through Project Vault, and permitting acceleration under a National Energy Dominance Council established in January 2025. On 4 February 2026, 54 countries gathered in Washington for the inaugural Critical Minerals Ministerial, launching the Forum on Resource Geostrategic Engagement (FORGE) as the successor to the Minerals Security Partnership and announcing joint Action Plans with the European Commission, Japan, and Mexico.

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These developments are not incremental. They represent a structural reordering of how governments, industry, and financial institutions approach the materials that underpin strategic technologies. Yet the policy responses on each side of the Atlantic differ substantially in instrument design, fiscal scale, and risk profile, and neither is sufficient on its own to address the underlying challenge.

 

The EU's Critical Raw Materials Act (Regulation (EU) 2024/1252) establishes non-binding 2030 benchmarks: at least 10% of the Union's annual consumption of strategic raw materials from domestic extraction, 40% from domestic processing, 25% from recycling, and no more than 65% from any single third country at any stage of the value chain. Implementation is being reinforced by the RESourceEU Action Plan, which mobilises approximately €3 billion for permanent magnets, batteries, and defence-critical inputs. The European Court of Auditors, in its Special Report 04/2026, assessed that the EU remains a long way from reaching its processing targets and that domestic processing capacity is in some areas shrinking rather than growing.

 

The US has moved toward direct federal intervention. Executive Order 14241 (March 2025) declared a national energy emergency and activated Defence Production Act authorities for critical minerals. The Department of Defense has taken equity stakes in domestic producers, including MP Materials and USA Rare Earth. Project Vault, launched in February 2026, establishes a strategic minerals stockpile backed by approximately $12 billion in Export-Import Bank lending and private capital. The Administration has set a target that 90% of supply for 25 core critical minerals should come from domestic or allied sources by 2030.

 

These are not simply different policy choices. They reflect distinct regulatory architectures, financing traditions, and strategic priorities that determine which projects are viable, which partnerships succeed, and how risks are allocated between public and private actors. For project developers, this determines which jurisdictions offer credible pathways to implementation. For investors, it shapes risk assessment and capital allocation. For policymakers, it reveals where intervention is effective and where it creates unintended consequences. For downstream companies, it informs sourcing strategies and supply chain resilience.

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AAP Consulting approaches CRM as an interconnected system. Supply outcomes are determined not by any single factor but by the interaction between value chain structures, policy and regulatory frameworks, geopolitical dependencies, environmental and social constraints, and project finance considerations. Weakness or misalignment in any one area can prevent otherwise promising projects from advancing. Conversely, strategic alignment across these dimensions is increasingly what differentiates viable and resilient projects from those that struggle to progress.