Value chain structures
Critical raw material (CRM) or critical mineral value chains encompass a sequence of stages through which geological potential is translated into usable materials and, ultimately, economic and strategic value. These stages extend from exploration and resource definition through extraction, processing, refining, manufacturing, and recycling. While this sequence is often presented as linear, outcomes in practice depend on how each stage interacts with policy, geopolitics, environmental and social constraints, and project finance considerations.
Understanding the structure of the value chain is a necessary starting point for analysing supply risks. However, it is rarely sufficient on its own. Bottlenecks tend to arise not because a single stage is missing, but because frictions accumulate across stages or because one segment of the chain becomes strategically concentrated. This section examines each stage of the CRM value chain, identifies where vulnerabilities emerge, and analyses how concentration, dependencies, and structural constraints shape supply outcomes.
Exploration: forming the project pipeline
Exploration refers to the identification, evaluation, and delineation of mineral resources prior to extraction. It is the stage at which geological uncertainty is highest and where decisions are made about whether potential deposits justify further development. Exploration activities range from regional reconnaissance and geochemical surveys through target identification, drilling programmes, and resource estimation that meet the standards required for investment decisions and regulatory approvals.
For many CRM, geological availability is not the primary constraint. Known resources exist across a wide range of jurisdictions, and geological surveys conducted over recent decades have identified significant deposits in regions that remain underexplored relative to historical mining centres. However, exploration activity remains unevenly distributed, reflecting differences in regulatory regimes, access to land, availability of geological data, fiscal terms, and the risk tolerance of exploration capital.
Where exploration is limited, future supply options may be constrained regardless of downstream capacity. This temporal dimension is often underappreciated in policy discussions focused on near-term supply security. Projects typically require 10 to 15 years from discovery to production, and in jurisdictions with complex permitting or contested land access, timelines can extend significantly beyond this range. As a result, underinvestment in exploration today creates pipeline constraints that manifest as supply shortages a decade or more into the future.
The European Commission’s RESourceEU explicitly recognises exploration as a bottleneck in the European Union’s (EU) supply chain resilience. The Communication notes that exploration spending in the EU has declined significantly relative to other mining regions, and that geological potential remains underutilised due to regulatory fragmentation, limited access to geological data, and a lack of coordinated support for early-stage projects. The Critical Raw Materials Act addresses this through provisions for geological surveys, data sharing, and streamlined permitting for exploration activities, but implementation remains at an early stage.
In the United States (US), exploration activity is more robust but geographically uneven. The US Geological Survey’s (USGS) Mineral Commodity Summaries 2025 highlight that while the US has significant identified resources for several critical minerals, exploration investment is concentrated in politically and socially stable jurisdictions with established mining infrastructure. Regions with geological potential but limited historical exploration, including parts of Alaska and the Interior West, face challenges related to land access, Indigenous consultation requirements, and competition with other land uses such as conservation and recreation.
Exploration is typically characterised by high technical risk, limited access to project finance, and long lead times before commercial viability can be assessed. Equity capital, often from junior mining companies or strategic investors, finances the majority of exploration activity. Public support, where available, tends to focus on geological survey data, regulatory clarity, and risk-sharing instruments rather than direct financing of exploration programmes. The effectiveness of these mechanisms depends on their ability to reduce information asymmetries, clarify regulatory pathways, and provide sufficient incentive for private capital to accept exploration risk.
Extraction: from resource to production
Extraction refers to the mining or recovery of raw materials from primary deposits following the definition of economically viable resources through exploration and feasibility studies. For some CRM, geological endowment is genuinely concentrated, and access to suitable deposits is a binding constraint on supply. Rare earth elements, for example, occur in economically significant concentrations in a limited number of deposit types, and high-grade deposits suitable for low-cost production are geographically concentrated in China, the US, Australia, and a small number of other jurisdictions.
For many other CRM, however, known resources exist across a wide range of jurisdictions. The USGS Mineral Commodity Summaries 2025 and the European Commission’s Critical Raw Materials Factsheets (2023) document that materials such as lithium, cobalt, nickel, and graphite have identified resources distributed across multiple continents. In these cases, the main constraints on supply tend to arise less from geology itself than from permitting timelines, land access, community acceptance, and environmental and social considerations.
Permitting processes for mining projects vary significantly across jurisdictions but commonly involve environmental impact assessments, water use permits, land use approvals, and consultations with affected communities and Indigenous peoples. In the European Union, permitting timelines for mining projects can exceed ten years, and in some Member States, no new mining permits have been issued in decades despite identified resources. The Critical Raw Materials Act seeks to address this through provisions for streamlined permitting of strategic projects, with a target timeline of 27 months for extraction projects, but achieving this in practice will require substantial institutional capacity building and coordination across national and subnational authorities.
The Biden Administration’s 2021 supply chain review (Building Resilient Supply Chains, Revitalizing American Manufacturing, and Fostering Broad-Based Growth) identified permitting timelines as a significant barrier to domestic mineral production. Since January 2025, the Trump Administration has pursued accelerated permitting through the National Energy Dominance Council, which has designated over 25 critical mineral projects for inclusion on the Federal Permitting Dashboard under FAST-41 transparency provisions. These projects benefit from coordinated federal review and public accountability for permitting timelines, though whether this translates into materially faster approvals remains to be seen, as most projects are still in early stages of environmental review. Fundamental tensions between competing land uses and stakeholder interests persist regardless of administrative streamlining efforts.
Beyond permitting, land access is often contested. Mining projects compete with conservation priorities, recreational use, Indigenous land rights, and local opposition rooted in concerns about environmental impacts, water availability, or socioeconomic disruption. These concerns are legitimate and reflect broader societal expectations about sustainability and community consent, but they also create uncertainty for project developers and investors. Projects that fail to establish credible engagement processes early, ideally during exploration, often face prolonged opposition or regulatory delays that undermine financial viability.
Extraction is capital-intensive, with upfront investment required for mine development, infrastructure, and equipment before revenue generation begins. This capital intensity, combined with long permitting timelines and operational uncertainty, makes extraction projects highly sensitive to policy stability, regulatory clarity, and access to patient capital. Where these conditions are absent, projects may remain undeveloped despite favourable geology and strong commodity prices.
Processing: the hidden bottleneck
Processing refers to the initial transformation of extracted material into intermediate products suitable for further upgrading. This stage typically involves physical or chemical concentration and results in outputs such as concentrates, matte, or partially refined materials that are not yet usable for most industrial or manufacturing applications. Processing is often one of the most capital and energy-intensive segments of the value chain, and it is where concentration risks become most pronounced for many CRM.
The European Commission’s RESourceEU and the associated Strategic Dependencies and Capacities assessment document that processing capacity for several CRM is highly concentrated geographically, with China accounting for dominant shares of global processing for rare earth elements, lithium, cobalt, graphite, and several other materials. For rare earths, China processes over 85% of the global supply. For lithium, China processes approximately 60% of global lithium compounds despite accounting for a smaller share of upstream mining. For cobalt, the Democratic Republic of the Congo produces the majority of global mine supply, but China refines over 70% of cobalt metal and chemicals.
This concentration at the processing stage is not primarily a function of resource geology. It reflects historical investment decisions, industrial policy, regulatory environments, access to infrastructure, and the availability of technical expertise. China’s dominance in processing emerged over several decades through sustained public investment, tolerance for environmental externalities that were not internalised into project costs, and strategic industrial policy that prioritised vertical integration across CRM value chains.
For project developers and investors outside China, the processing bottleneck creates significant challenges. Establishing processing capacity requires substantial capital, access to reliable feedstock supply, technical expertise, environmental permits, and long-term demand visibility. Processing facilities are typically designed for specific ore types or feedstock compositions, which limits flexibility and increases technical risk. Where processing capacity is absent or limited, upstream mining projects may struggle to find economically viable pathways to market, even when extraction is technically and financially feasible.
The US has recognised processing as a critical vulnerability. The Department of Energy (DOE)’s America’s Strategy to Secure the Supply Chain for a Robust Clean Energy Transition identifies processing and refining as priority areas for public investment. Since January 2025, the Trump Administration has accelerated direct federal investment in processing capacity, including a $7.4 billion zinc refinery in Tennessee (with Korea Zinc and Department of Defense participation) and equity stakes in rare earth processing (MP Materials, USA Rare Earth). These investments represent a shift from indirect support through tax credits and loans toward direct ownership positions and strategic partnerships with allied processors.
In the EU, the Critical Raw Materials Act establishes benchmarks for domestic processing capacity, targeting that at least 40% of the Union’s annual consumption of strategic raw materials should be produced within the EU by 2030. Achieving this will require substantial investment in new processing facilities, workforce development, and integration with downstream manufacturing. The Act designates strategic projects as eligible for streamlined permitting and public financing support, but the scale of investment required significantly exceeds historical norms for the European mining and metals sector.
Processing is not only capital-intensive but also energy-intensive. Many CRM processing routes require high temperatures, chemical reagents, or electrochemical processes that consume significant electricity. For jurisdictions seeking to develop processing capacity whilst meeting climate commitments, this creates a tension between supply security objectives and decarbonisation goals. Processing facilities must either be located in regions with access to low-carbon energy or accept higher operating costs associated with renewable energy or carbon pricing. This tension is particularly acute in the EU, where carbon pricing under the Emissions Trading System and ambitious renewable energy targets create a cost structure that is less competitive than regions with lower energy costs or fewer climate constraints.
Refining: specifications and market access
Refining builds on processed intermediates to produce high-purity materials that meet the specifications required for industrial and manufacturing use. This stage is critical for determining whether upstream resources can be converted into materials that are usable within strategic value chains such as battery manufacturing, semiconductor production, or permanent magnet fabrication.
For many CRM, refining capacity is more strategically sensitive than extraction or processing. Refining requires specialised technology, stable regulatory frameworks, and long-term demand visibility. It is also closely linked to downstream manufacturing, as refiners often produce to specifications defined by specific customers or industry standards, which creates path dependencies where refiners, manufacturers, and technology developers co-evolve within integrated industrial ecosystems.
China’s dominance extends through refining as well as processing. For lithium, China refines over 60% of the lithium hydroxide and lithium carbonate used in battery manufacturing. For cobalt, Chinese refiners produce the majority of cobalt sulphate and other battery-grade chemicals. For rare earths, China not only processes concentrates but also produces separated rare earth oxides, metals, and alloys used in permanent magnets, catalysts, and other advanced applications. This vertical integration gives Chinese firms significant control over global CRM supply chains and creates dependencies that are difficult to offset through upstream diversification alone.
Refining capacity outside China exists but is limited relative to projected demand growth. The US has some refining capacity for certain critical minerals, including rare earths (MP Materials’ Mountain Pass facility in California) and lithium (Albemarle’s Silver Peak facility in Nevada), but these facilities account for small shares of global capacity. Europe has even less refining capacity, with the exception of some cobalt and nickel refining in Finland and limited rare earth separation capacity under development. The International Energy Agency’s Critical Minerals Market Review highlights that the lack of diversified refining capacity is a significant vulnerability for clean energy supply chains and that expanding capacity will require coordinated policy support and substantial private investment.
Refining projects face challenges related to feedstock security, technical complexity, and market access. Refiners require reliable access to processed intermediates, which often means negotiating long-term supply agreements with upstream producers or investing in vertically integrated operations. Technical complexity varies by material but is generally high for CRM, particularly for rare earths, where separation of individual elements requires sophisticated chemical processing and specialised expertise. Market access depends on establishing relationships with downstream manufacturers and meeting stringent quality specifications, which can be difficult for new entrants competing against established suppliers with proven track records.
The Critical Raw Materials Act and US policy frameworks increasingly recognise refining as a priority for public support. Strategic project designation, access to financing through public development banks, and demand-side support through procurement or offtake guarantees are all mechanisms being deployed to de-risk refining investments. However, the capital requirements and technical barriers remain substantial, and the timeline for bringing new refining capacity online is measured in years rather than months.
Manufacturing: translating materials into strategic value
Manufacturing integrates refined materials into components, products, or intermediate goods. At this stage, supply security is shaped by industrial ecosystems, technical capabilities, workforce skills, and proximity to end markets. Manufacturing is where raw material supply translates into economic and strategic value, and it is the stage where policy objectives related to industrial competitiveness, technological sovereignty, and employment are most directly engaged.
For CRM-intensive sectors such as batteries, permanent magnets, semiconductors, and renewable energy equipment, manufacturing capacity has become a focal point of industrial policy in both the EU and the US. The European Commission’s RESourceEU situates CRM supply chain development within the broader context of the European Green Deal Industrial Plan and the Net-Zero Industry Act, reflecting recognition that upstream investments in extraction, processing, and refining are strategically incomplete if they do not connect to domestic or allied manufacturing capacity.
Battery manufacturing illustrates the dynamics clearly. The EU has significant ambitions to develop domestic battery manufacturing capacity to support electric vehicle deployment and energy storage. The EU Battery Regulation establishes sustainability and supply chain due diligence requirements for batteries placed on the EU market, creating regulatory incentives for manufacturers to source responsibly and transparently. However, battery manufacturing remains concentrated in Asia, particularly China, South Korea, and Japan, which together account for the majority of global lithium-ion battery cell production. European battery manufacturing capacity is expanding, supported by public investment and strategic partnerships, but achieving the scale required to meet projected EU demand will require sustained policy support and substantial private capital mobilisation.
In the US, battery manufacturing capacity is similarly underdeveloped relative to demand projections. The National Blueprint for Lithium Batteries 2021–2030, developed by the DOE, identifies battery manufacturing as a critical gap in US supply chain resilience and establishes goals for domestic production capacity across the entire battery value chain. The Inflation Reduction Act provides substantial tax credits for domestic battery manufacturing. It creates incentives for sourcing critical minerals from the US or free trade agreement partners. Still, the majority of battery manufacturing investment to date has been by Asian firms establishing US operations rather than indigenous US capacity.
Manufacturing decisions are strongly influenced by policy and industrial strategy, including subsidies, tax incentives, trade measures, and technical standards. For CRM, manufacturing capacity determines whether upstream investments translate into domestic economic value or whether value creation remains externalised. This is not purely a question of economic nationalism; it also reflects practical considerations related to supply chain resilience, quality control, and coordination between material specifications and product performance requirements.
Manufacturing also creates feedback loops into upstream investment decisions. Where manufacturing capacity is concentrated in specific jurisdictions, upstream producers have strong incentives to locate processing and refining capacity nearby to reduce logistics costs, ensure quality alignment, and maintain close relationships with customers. This dynamic reinforces existing concentration patterns and makes diversification efforts more challenging unless accompanied by coordinated downstream investment.
Recycling: closing the loop
Recycling and secondary supply play an increasingly important role in long-term resilience and are now recognised as integral components of CRM strategies in both the EU and the US. While recycling cannot fully substitute for primary supply in the short term, particularly given the rapid growth in demand for several CRM, it can reduce pressure on upstream stages, mitigate exposure to external dependencies, and contribute to circular economy objectives.
The potential contribution of recycling varies significantly by material and application. For materials used in long-lived products such as infrastructure, buildings, or durable goods, recycling potential is limited in the near term because products have not yet reached end-of-life. For materials used in shorter-lived products such as consumer electronics or batteries, recycling potential is greater, but collection rates, technical feasibility, and economic viability remain constraints.
The European Commission’s Circular Economy Action Plan and the Critical Raw Materials Act both establish recycling as a priority for reducing import dependence and supporting domestic supply. The Critical Raw Materials Act sets a benchmark that at least 25% of the EU’s annual consumption of strategic raw materials should be met from recycled sources by 2030. Achieving this will require substantial investment in collection infrastructure, recycling technology, and regulatory frameworks that incentivise product design for recyclability and create stable markets for secondary materials.
The EU Battery Regulation is particularly ambitious in its recycling provisions. It establishes mandatory collection rates for waste batteries, minimum levels of recycled content in new batteries, and material recovery targets for lithium, cobalt, nickel, and lead. These requirements create regulatory certainty for recycling investments and establish a framework for closed-loop battery supply chains within the EU. However, implementation challenges remain significant, including the need for harmonised collection systems, standardised battery designs, and cost-effective recycling technologies that can process diverse battery chemistries.
In the US, recycling policy is less centralised and more fragmented across federal, state, and local jurisdictions. The Environmental Protection Agency’s National Recycling Strategy outlines federal priorities for improving recycling systems, but it does not establish binding targets or mandatory requirements comparable to EU legislation. The Bipartisan Infrastructure Law includes funding for recycling research and demonstration projects, and the DOE has supported battery recycling technology development through its Vehicle Technologies Office and the Battery Recycling Prize competition. However, commercial-scale battery recycling capacity in the US remains limited, and most end-of-life batteries are either exported for recycling in Asia or landfilled.
Recycling capacity depends on several factors beyond technology. Product design is critical; products designed for disassembly and material separation are far easier to recycle than those where materials are bonded, embedded, or present in trace quantities. Collection systems must be economically viable and logistically feasible, which requires coordination between manufacturers, retailers, waste management operators, and regulatory authorities. Economic viability depends on the market value of recovered materials relative to the cost of collection, sorting, and processing, which can fluctuate with commodity prices and make recycling financially precarious without policy support.
For CRM, recycling also faces technical challenges related to material complexity and purity requirements. Many CRM are used in small quantities within complex assemblies, making physical separation difficult and costly. Refining recycled materials to the purity levels required for high-performance applications can be technically demanding and may require processing routes similar to those used for primary materials. As a result, recycling is not always a straightforward substitute for primary supply, and its contribution must be assessed material by material and application by application.
Despite these constraints, recycling is expected to play a growing role in CRM supply over the coming decades. The Organisation for Economic Co-operation and Development’s Global Material Resources Outlook to 2060 projects that secondary materials could meet a significant share of demand for several metals by mid-century, particularly where product lifetimes are short and collection infrastructure is well-developed. For CRM-intensive sectors such as batteries and electronics, design for recyclability and investment in collection and processing infrastructure are increasingly seen as essential components of long-term supply strategies.
Value chain vulnerabilities: concentration and interdependence
Across CRM value chains, risks rarely align neatly with individual stages. Concentration at processing or refining can undermine diversification efforts upstream. Weak links between extraction and manufacturing can limit domestic value creation. Delays at one stage can propagate across the system. Constraints at early stages, particularly exploration and permitting, can have long-term implications for supply resilience that are not easily offset by downstream investment alone.
Geographic concentration is perhaps the most visible vulnerability. China’s dominant position across multiple stages of numerous CRM value chains creates systemic risk that cannot be addressed through marginal adjustments or incremental diversification. The scale of China’s processing and refining capacity, combined with its integrated industrial ecosystems and strategic use of export policy, means that reducing dependence on Chinese supply requires not only new upstream projects but also coordinated investment in midstream and downstream capacity outside China.
However, concentration is not the only source of vulnerability. Technical bottlenecks, where a limited number of firms control specific processing or refining routes or require proprietary technology, can create dependencies even where geographic distribution is broader. Regulatory fragmentation, where different jurisdictions impose incompatible standards or permitting requirements, can increase transaction costs and limit the scalability of projects. Infrastructure gaps, including energy supply, water availability, transport logistics, and waste management, can constrain project development even where policy support and financing are available.
Interdependence across stages means that strengthening one segment of the value chain without addressing others is often insufficient. A jurisdiction that develops significant extraction capacity but lacks processing capability must export concentrates for processing elsewhere, typically China, which limits strategic value and creates vulnerability to trade policy. Conversely, a jurisdiction that invests in refining capacity without securing reliable upstream feedstock faces supply risk and may struggle to operate facilities at economic scales. Vertical integration, either within firms or through strategic partnerships and long-term contracts, can mitigate these interdependencies but requires coordination that is often difficult to achieve across sovereign jurisdictions with different policy priorities and regulatory frameworks.
Value chain structure as a system constraint
Value chain structure is best understood as part of a broader system rather than a standalone dimension. Decisions about where to invest, which partnerships to pursue, and how to structure projects depend on how the value chain interacts with policy and regulatory frameworks, geopolitical dependencies, environmental and social constraints, and project finance considerations.
Projects that align across these dimensions are more likely to secure financing, navigate permitting, and progress to implementation. Those that do not may remain technically feasible but economically or politically unrealised. Therefore, understanding value chain vulnerabilities requires looking beyond any single stage to consider how the entire system shapes outcomes and where interventions are most likely to be effective.
The following sections examine these system dimensions in detail, building on the value chain foundation outlined above to analyse how policy, geopolitics, environmental and social factors, and finance interact to determine which projects advance and which do not.