The Refining Gap: Why the Transatlantic Critical Minerals Agenda Must Move Beyond the Mine

When representatives of 54 countries gathered in Washington on 4 February 2026 for the inaugural Critical Minerals Ministerial, the scale of ambition was unmistakable. In the space of a single week, the Trump administration launched Project Vault, a public-private strategic minerals stockpile backed by approximately $12 billion in seed funding; unveiled the Forum on Resource Geostrategic Engagement (FORGE) as successor to the Biden-era Minerals Security Partnership; and announced joint Action Plans with the European Commission, Japan, and Mexico, including the prospect of coordinated price floors and a binding plurilateral trade framework for critical minerals. The European Union, for its part, signalled its readiness to sign a memorandum of understanding with the United States on critical mineral supply chain security.

These are significant developments. They reflect a shared recognition, at the highest political levels, that concentrated mineral supply chains are no longer merely an industrial concern but a first-order geopolitical vulnerability. Yet there is a risk that the current momentum, welcome as it is, continues to focus disproportionately on the most visible parts of the value chain, namely mining and raw material access, while underweighting the segment where Western vulnerability is most acute: refining and processing.

This article examines the state of play on both sides of the Atlantic and argues that the emerging transatlantic critical minerals agenda will be judged not by how many new mines it opens or how many memoranda of understanding it signs, but by whether it can credibly begin to rebuild the midstream processing capacity that China has spent decades consolidating.

The structural bottleneck: processing, not mining

The public and political discourse around critical minerals has, understandably, often centred on mining. Mining is tangible. It evokes questions of permitting, land use, environmental protection, and resource nationalism, all of which carry significant political weight. But as several recent assessments have made clear, the most consequential chokepoint in critical mineral supply chains is not extraction but what comes after it.

The Critical Minerals Value Chain: Where the Real Bottleneck Lies

As the Payne Institute for Public Policy at Colorado School of Mines observed in its 2025 State of Critical Minerals Report, it is China's dominant market share downstream of mining, specifically in refining and processing, that creates the most acute vulnerability for Western economies. China spent decades building not only mining capacities at home and abroad, but near-monopolies in the intermediate processing steps: the separation, refining, and conversion operations that transform raw ore into the materials that actually enter industrial supply chains. Policy analysts and industry observers have increasingly recognised that this dependency is, if anything, more pronounced for the EU than for the US, given Europe's even thinner domestic processing base.

The European Court of Auditors' Special Report 04/2026, published in February 2026 and examining the EU's critical raw materials policy for the energy transition, reinforces this assessment in stark terms. Currently, 100% of rare earth processing takes place outside the EU, overwhelmingly in China. The EU's Critical Raw Materials Act (CRMA) set an ambitious benchmark of processing 40% of strategic raw materials domestically by 2030. Yet the Court found that the EU appears to be a long way from reaching this level and that, in fact, domestic processing capacity is shrinking rather than growing. The EU-27 lost approximately half of its primary aluminium processing capacity between 2019 and 2023, a trajectory driven in part by high energy costs that render energy-intensive processing operations uncompetitive relative to other regions.

The US faces a structurally similar problem, though it manifests differently. Across the critical minerals spectrum, China's pricing power is squeezing the profitability of private mining and processing operations, effectively deterring new Western investment. Lithium, cobalt, and nickel prices have all fallen below the thresholds required to support new capacity outside China. In rare earths, current pricing for NdPr oxide, a non-substitutable input for permanent magnets, stands at roughly half of what US mining companies say they need to be profitable, even at scale. In copper, refining margins have turned negative as a surge of Chinese-backed capacity has overwhelmed the global market. The Payne Institute's 2025 report captured the dynamic plainly: China is exerting its influence across all critical minerals processing.

This is not simply a market failure; it is the product of deliberate strategic positioning by Beijing over several decades, combined with its willingness to deploy export restrictions as geopolitical leverage. In 2025, China imposed export licence requirements on several rare earths and permanent magnets, triggering price shocks and delivery delays. A second package expanded restrictions to include processing equipment and categorical denials for defence-related critical raw materials, with implementation suspended until November 2026. The message was clear: control over processing confers control over supply, regardless of where the ore is mined.

Two strategies, one problem

Both the EU and the US have recognised the challenge and mobilised policy responses. But the approaches differ substantially in ambition, instrument design, and risk profile, and neither is, on its own, sufficient to address the scale of the processing deficit.

The EU approach is anchored in the CRMA, which entered into force in 2024 and established non-binding 2030 benchmarks: 10% of annual consumption from domestic extraction, 40% from domestic processing, 25% from recycling, and a 65% cap on single-country import dependency for any strategic raw material. The CRMA introduced a Strategic Projects instrument to channel permitting and financing support, and by 2025, the Commission had selected 47 EU-based and 13 non-EU-based projects.

However, the European Court of Auditors' assessment raised serious questions about whether these mechanisms can deliver at the required pace. The targets themselves lack clear justification: no public documentation explains how the specific benchmarks were derived or how they relate to the EU's renewable energy or net-zero industry targets. Moreover, the targets are aggregated across all strategic raw materials, meaning they can technically be met without delivering improvements for individual materials where dependency is most severe.

On strategic projects, the Court found that most were at an early stage of development when selected, making it highly unlikely that they will meaningfully contribute to the 2030 targets. Financial viability is not a condition for project selection, and at least one project promoter filed for bankruptcy after designation. Critically, the CRMA provides no dedicated EU funding for strategic projects, a gap that the Commission's proposed European Competitiveness Fund and the RESourceEU Action Plan have begun to address but have not yet closed.

RESourceEU, launched in late 2025, represents the EU's most concrete attempt to accelerate the strategy. It mobilises approximately €3 billion over 12 months to push mature projects across the finish line in three priority areas: permanent magnets, batteries, and defence-critical inputs. The plan includes demand aggregation, joint purchasing, strategic stockpiling, an export ban on magnet and aluminium scrap, and recycled content requirements for magnets. Yet early assessments suggest that while RESourceEU addresses targeted bottlenecks, it does not constitute a structural breakthrough. Key levers remain voluntary (joint purchasing) or politically contingent (price stabilisation, equity stakes, diversification requirements). The overall funding volume remains relatively modest, with larger-scale EU financing potentially achievable only under the next Multiannual Financial Framework (2028 to 2034).

The US approach has moved faster and with a heavier hand, deploying instruments that are largely unprecedented in the American context. The Department of Defense's partnership with MP Materials, announced in mid-2025, broke new ground by combining equity investment, offtake agreements, and a price floor for NdPr oxide. MP Materials' targeted capacity of 10,000 metric tons per year of NdPr oxide and magnets would fulfil over 60% of recent US demand and represents the first serious domestic rare earth magnet production in decades. The deal appears to have had a crowding-in effect: MP subsequently secured $1 billion in commercial loans and an offtake agreement with Apple.

The Trump administration has expanded this toolkit further. Executive Order 14201 (March 2025) laid the groundwork for the Development Finance Corporation to support domestic mining and processing. The administration has taken equity stakes in critical mineral companies, including MP Materials, USA Rare Earth, and Canadian firms Lithium Americas and Trilogy Metals. Project Vault, announced on 2 February 2026, establishes a strategic minerals reserve backed by a $10 billion EXIM Bank loan and approximately $2 billion in private capital, with participation from equipment manufacturers including GE Vernova, Boeing, and Western Digital alongside commodity traders.

Most significantly, the administration has signalled an intent to reshape the global critical minerals trade itself. At the February Ministerial, Vice President Vance proposed a preferential trade zone for critical minerals, protected by enforceable price floors and adjustable tariffs. The newly established FORGE framework, chaired initially by South Korea, is intended to coordinate this effort among allied nations. Separately, the US Trade Representative announced that the US, the European Commission, and Japan will develop Action Plans for critical minerals supply chain resilience, with a memorandum of understanding expected within 30 days.

The risk of fragmentation

The scale of US government mobilisation, over $30 billion in financing support announced in the past six months alone, is striking and represents a qualitative shift in how Washington approaches industrial policy for critical minerals. But it also creates a gravitational pull that may not work to the broader Western interest.

The RESourceEU assessment documented early evidence of this dynamic. The US "mine-to-magnet" strategy, by tying up scarce non-Chinese supply through subsidies, equity stakes, and long-term offtake agreements, is already drawing processing capacity and investment toward the US. There are already early indications of European processing capacity shifting to the US, with firms such as Less Common Metals and Solvay among the reported cases. This is a rational response by firms to more favourable policy conditions, but the aggregate effect risks being counterproductive: if allied nations compete for the same limited non-Chinese processing capacity, the result is displacement rather than net expansion, and China's structural advantage remains intact.

The International Energy Agency's Global Critical Minerals Outlook 2025 projects that the average market share of the top three refining nations will decline only marginally by 2035, suggesting that diversification of processing supply chains will be slow even under favourable conditions. This timeframe underscores a central reality: the challenge is not merely to redirect existing capacity but to build genuinely new capacity at scale. Neither the EU nor the US can do this alone. The EU has regulatory frameworks and market size, but lacks the fiscal firepower and the tolerance for state-led industrial intervention that the US is now demonstrating. The US has financial muscle and political urgency, but cannot secure the full range of processing capabilities, supply relationships, and market depth it needs without allied participation.

The paused EU-US critical minerals agreement of 2023 to 2024 was an early casualty of this misalignment. The new Action Plan announced at the February Ministerial represents a chance to restart, but whether it advances beyond memoranda of understanding to operational coordination on the midstream will be the decisive test.

What midstream cooperation could look like

Several elements of a more substantive transatlantic approach to the processing gap are already visible in the respective policy frameworks, though they remain largely unconnected.

First, coordinated price support and demand anchoring. The Payne Institute report made a compelling case that for many critical minerals, particularly lower-volume defence-relevant materials, the barrier to Western processing investment is not technological but economic: market prices, often depressed by Chinese overproduction, do not support the business case for new capacity. The Trump administration's embrace of price floors and the EU's tentative steps toward price stabilisation under RESourceEU point in the same direction. Aligning these mechanisms across the Atlantic, ensuring that a price floor established by Washington does not simply redirect limited supply away from European buyers, would be a meaningful step.

Second, joint investment in processing infrastructure. The rare earths value chain illustrates the challenge most clearly. Separation and refining of rare earth elements is among the most complex operations in modern metallurgy, and China has built a decisive technology lead. Building competitive Western separation capacity requires not only capital but sustained demand commitments, technology transfer where possible, and coordinated permitting. The Department of Defense-MP Materials model offers one template; the EU's Strategic Projects instrument offers another. Connecting these frameworks, for instance, through mutual recognition of strategic project status or co-financing of processing facilities in allied third countries, would be more impactful than parallel bilateral partnerships that compete for the same projects.

Third, recycling and secondary supply. Both the EU and the US recognise the importance of recycling, but progress has been limited. The European Court of Auditors found that out of 26 materials critical for the energy transition, seven have end-of-life recycling rates between 1% and 5%, and ten, including lithium, gallium, and silicon metal, are not recycled at all. The Payne Institute highlighted the US copper scrap opportunity: approximately 880,000 metric tons of copper scrap were exported in 2023, with around 40% going to China, even as the US imported refined copper. RESourceEU's proposed export ban on magnet scrap and aluminium scrap signals a shift, but transatlantic coordination on recycling standards, waste trade rules, and joint investment in secondary processing capacity could multiply the impact on both sides.

Fourth, market infrastructure and transparency. The Payne Institute noted that price discovery for many critical minerals is opaque, with thin markets and reliance on Price Reporting Agencies. The EU's Raw Materials Mechanism, launched in 2025 under the EU Energy and Raw Materials Platform to facilitate demand aggregation and coordinated procurement of strategic raw materials, and the US push for FORGE-based reference pricing are both attempts to improve market functioning. Interoperability between these platforms, or at a minimum shared data standards, would strengthen the collective bargaining position of allied buyers relative to dominant suppliers.

Conclusion: the future of the transatlantic critical minerals agenda

The events of February 2026 mark a genuine inflexion point. The political salience of critical minerals has never been higher on either side of the Atlantic, and the institutional machinery to act, from FORGE and Project Vault to RESourceEU and the CRMA Strategic Projects, is more developed than at any point in the past decade.

But political salience and institutional activity are not the same as strategic effectiveness. The core challenge, rebuilding Western refining and processing capacity in the face of entrenched Chinese dominance, pricing strategies designed to deter competitor investment, and a decade-long lead in metallurgical technology, remains largely ahead. The EU's own auditors have concluded that the current policy framework is not on track to meet its 2030 targets. The US approach is bolder in scale and speed, but its domestically focused, transactional character risks fragmenting allied efforts at the precise moment when coordination matters most.

The test for the coming months is whether the Action Plans announced at the February Ministerial can move beyond diplomatic signalling toward concrete operational alignment on the midstream. This means joint processing investments, coordinated demand support, aligned trade instruments, and shared market infrastructure. The refining gap will not be closed by either Brussels or Washington acting alone. It will require a degree of transatlantic coordination that, to date, has proven difficult to sustain.

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Organisations seeking to translate these dynamics into an actionable strategy, whether to advance specific projects, to inform policy design, to structure investments, or to navigate regulatory and financing pathways across jurisdictions, are invited to contact AAP Consulting for further discussion.

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