What are critical raw materials
Critical raw materials (CRM), also known as critical minerals, are raw materials that are economically important and subject to a high risk of supply disruption. Governments and institutions use the concept to identify materials whose availability is essential for strategic economic activities and whose supply is vulnerable to structural constraints that cannot be readily addressed through conventional market mechanisms alone.
Criticality is therefore not an intrinsic property of a material. It reflects the interaction between economic importance, supply risk, and the ability of markets or policy frameworks to respond to disruption. As technologies, demand patterns, and geopolitical conditions evolve, so too can the list of materials considered critical. This dynamic quality distinguishes CRM from static resource classifications and aligns the concept closely with evolving industrial and security priorities.
.jpg)
The analytical foundations of criticality assessment
Most CRM frameworks are based on two core dimensions. The first is economic importance, which captures the role a material plays in key sectors such as energy, transport, digital infrastructure, manufacturing, and defence. The second is supply risk, which reflects factors such as geographic concentration, governance conditions, trade restrictions, substitutability, and recycling potential. Materials that score highly on both dimensions are typically classified as critical.
This two-dimensional approach has become the methodological standard across major jurisdictions, but it is applied with varying degrees of granularity and sectoral focus. The European Union’s (EU) methodology, as outlined in the 2023 Critical Raw Materials Study and formalised in the Critical Raw Materials Act, evaluates economic importance at the sectoral level, assessing materials’ contribution to value added across strategic ecosystems, including renewable energy, digital technologies, aerospace, defence, and health. Supply risk is assessed through a combination of global supply concentration indices, import reliance, governance indicators in supplying countries, and the technical and economic feasibility of substitution or recycling.
In the United States (US), the approach is similarly structured but reflects different institutional arrangements and strategic priorities. The US Department of the Interior, through the US Geological Survey (USGS), publishes a statutory list of critical minerals, most recently updated in January 2025, which identifies materials essential to US economic or national security and whose supply chains are vulnerable to disruption. The US Department of Energy conducts complementary assessments focused specifically on materials critical to clean energy technologies, incorporating demand projections, supply chain vulnerabilities, and strategic considerations related to energy transition goals.
While methodologies differ in detail, the underlying logic is consistent. Criticality is assessed by mapping dependency (how essential is the material?) against vulnerability (how secure is the supply?). This framing allows policymakers to prioritise attention and resources, but it also means that criticality assessments vary across jurisdictions and over time, reflecting different economic structures, policy priorities, and external dependencies.
Geographic and temporal variation in criticality
Because criticality is a relational concept rather than a fixed attribute, different jurisdictions may designate different materials as critical, even when operating from similar methodological principles. The EU’s 2023 list includes 34 CRM, a significant expansion from previous iterations, reflecting both the broadening scope of strategic technologies and heightened awareness of supply chain vulnerabilities exposed during recent geopolitical and economic shocks. Materials newly added to the EU list include nickel, copper, and silicon metal, reflecting their growing importance in batteries, electricity networks, and semiconductors.
The US list of critical minerals, as published by USGS in November 2025, includes 60 materials, a significant expansion from the 50 materials included in earlier lists. The 2025 list adds copper, silver, uranium, metallurgical coal, boron, lead, phosphate, potash, rhenium, and silicon, reflecting both the broadening scope of strategic technologies and the Trump Administration’s focus on minerals essential to energy dominance, defence applications, and artificial intelligence infrastructure.
Temporal variation is equally significant. As demand for specific technologies grows or declines, the economic importance of associated materials shifts. Similarly, as supply chains diversify or concentrate, supply risk profiles change. The inclusion of lithium and cobalt on critical lists accelerated sharply after 2015 as electric vehicle deployment scaled and their role in battery chemistries became central to energy transition pathways. Conversely, materials that were once considered critical may be downgraded if substitution becomes technically viable at scale or if supply sources diversify sufficiently to reduce vulnerability.
This temporal dimension underscores that criticality is not a permanent status. It is a policy and analytical tool that must be periodically reassessed to remain relevant. Both the European Commission and USGS conduct regular reviews, typically every three to four years, to ensure that designations reflect current economic realities and supply conditions.
Economic importance as a demand-side metric
Economic importance captures the role a material plays in high-value or strategically significant sectors. It is fundamentally a demand-side metric, reflecting how dependent an economy is on a material for producing goods or services that generate substantial economic value or support essential public functions.
In the EU methodology, economic importance is calculated by assessing a material’s contribution to the gross value added of specific industrial sectors, weighted by the sectors’ share of total EU economic output. Sectors considered include renewable energy (wind turbines, solar panels, batteries), digital technologies (semiconductors, data storage, telecommunications infrastructure), aerospace and defence, automotive manufacturing, and health technologies. A material scores highly on economic importance if it is used in sectors that are large relative to the overall economy and if those sectors are highly dependent on the material with limited capacity for substitution.
This approach reflects the EU’s industrial and strategic priorities, which emphasise decarbonisation, digitalisation, and technological sovereignty. It also means that materials used in niche applications, even highly specialised ones, may not be designated as critical unless the associated sectors represent a significant share of economic activity or strategic value.
Since January 2025, the Trump Administration has elevated critical minerals to a national security priority through Executive Order 14241 (Immediate Measures to Increase American Mineral Production), which declared a national energy emergency and positioned mineral production as essential to economic prosperity and strategic autonomy. The National Energy Dominance Council, established in January 2025, now coordinates CRM policy across federal agencies, marking a centralisation of strategic decision-making that was more fragmented under previous frameworks.
Both systems acknowledge that economic importance is not static. Technological change, industrial policy, and shifting consumer preferences all influence which materials become economically indispensable. As a result, assessments of economic importance must be forward-looking, incorporating projections of demand growth and technological trajectories alongside current usage patterns.
Supply risk as a multi-dimensional constraint
Supply risk captures the likelihood and potential impact of disruption to material availability. It is inherently more complex than economic importance because it must account for multiple, often interacting, sources of vulnerability.
The most commonly assessed dimension of supply risk is geographic concentration. When extraction, processing, or refining capacity is highly concentrated in a limited number of countries, any disruption in those countries can have disproportionate effects on global supply. The EU’s methodology quantifies concentration using the Herfindahl-Hirschman Index (HHI), a standard measure of market concentration, applied at the global level for each stage of the value chain. Materials with HHI scores above certain thresholds are considered to face elevated supply risk.
However, concentration alone does not fully capture supply risk. Governance and political stability in supplying countries are equally important. Materials sourced predominantly from jurisdictions with a weak rule of law, high political risk, or histories of export restrictions face greater vulnerability to supply disruption, even if concentration is moderate. The EU incorporates the World Governance Indicators into its supply risk assessments, adjusting concentration scores to reflect the governance profile of supplying countries.
Trade policy is another significant factor. Export restrictions, tariffs, and non-tariff barriers can limit access to materials even when physical availability is not constrained. Several major supplying countries have used trade policy as a tool of strategic leverage, imposing restrictions on CRM exports to support domestic industrial policy or exert geopolitical influence. The EU and US both monitor trade policy developments as part of their supply risk assessments, recognising that formal and informal trade barriers can undermine diversification efforts and increase systemic vulnerability.
Substitutability and recycling potential represent demand-side responses to supply risk. If a material can be substituted without significant loss of performance or cost, supply risk is reduced. Similarly, if recycling can provide a significant share of demand, dependence on primary supply diminishes. The EU’s methodology incorporates substitution indices and end-of-life recycling input rates as mitigating factors in supply risk calculations. However, substitution is often technically constrained, economically unviable, or applicable only in specific use cases. Recycling, while increasingly important, is limited by product lifetimes, collection infrastructure, and economic feasibility, particularly for materials used in small quantities or complex products where recovery is technically challenging.
Finally, supply risk must account for the time required to expand supply in response to demand growth or disruption. For many CRM, development timelines from exploration to production span 10 to 15 years, or even longer where permitting processes are complex or contested. This inelasticity means that supply cannot respond rapidly to price signals or policy interventions, creating structural vulnerability even where resources are geologically abundant.
Critical versus strategic raw materials
The terms CRM and strategic raw materials are often used interchangeably, but they are not synonymous. Understanding the distinction is essential for interpreting policy frameworks and investment priorities.
CRM are identified through analytical assessments of economic importance and supply risk. The designation is primarily descriptive and diagnostic. It highlights where vulnerabilities exist in the system and signals to policymakers, industry actors, and investors that particular materials warrant attention and, potentially, intervention.
Strategic raw materials are typically a narrower subset of CRM that have been prioritised for explicit policy intervention. The designation reflects political and strategic choices, such as the importance of a material for specific technologies (batteries, semiconductors, permanent magnets), industrial value chains (electric vehicles, renewable energy, defence systems), or security objectives (energy independence, technological sovereignty, military readiness). Strategic status is therefore normative rather than purely analytical. It involves a judgement about where public resources should be allocated, where regulatory support is most warranted, and where geopolitical exposure is least acceptable.
In the EU framework, strategic raw materials are designated under the Critical Raw Materials Act. As of the Act’s entry into force, the European Commission has identified a subset of CRM as strategic based on their centrality to green and digital transitions and the scale of projected demand growth. Strategic projects, defined as projects contributing to the extraction, processing, or recycling of strategic raw materials within the EU or in partner countries, are eligible for streamlined permitting, access to EU funding instruments, and other forms of public support designed to accelerate development.
The US does not use the term “strategic raw materials” in formal policy, but analogous prioritisation occurs through targeted programmes and financing mechanisms. The Department of Energy’s focus on materials critical to clean energy, combined with defence-related designations managed through the Defense Production Act and the Department of Defense’s Industrial Base Analysis and Sustainment programme, effectively creates a tiered approach where some materials receive disproportionate policy attention and public support.
In practice, a material may be critical without being designated as strategic, and strategic priorities may change more rapidly than underlying criticality assessments, which reflects the fact that strategic designation is inherently responsive to policy cycles, geopolitical developments, and shifts in industrial strategy, whereas criticality assessments are intended to be more stable and analytically grounded.
Why critical raw materials matter
CRM underpin a wide range of technologies that are central to contemporary economic and policy priorities. These include energy transition technologies such as lithium-ion batteries, wind turbines, solar photovoltaic panels, and electricity grid infrastructure, as well as digital technologies including semiconductors, data storage systems, fibre optics, and telecommunications networks. Advanced manufacturing, aerospace, and defence systems are similarly dependent on CRM for performance, efficiency, and reliability.
In many cases, small quantities of CRM are indispensable for enabling performance characteristics that cannot be achieved through substitution. Rare earth elements, for example, are used in permanent magnets that are essential for electric vehicle motors and wind turbine generators. While these materials represent a small share of total product mass and cost, their absence or unavailability would render the technologies non-functional or significantly less efficient, which creates a structural dependency that cannot be easily mitigated through conventional market adjustments.
As economies decarbonise, electrify, and digitalise, demand for several CRM is expected to grow significantly. The International Energy Agency’s projections, developed for its analysis of critical minerals in clean energy transitions, indicate that demand for lithium could increase by a factor of 40 by 2040 under scenarios consistent with international climate goals. Demand for graphite, cobalt, and nickel could increase by factors of 20 to 25. Copper, already one of the most widely used industrial metals, faces additional demand growth from electricity networks, electric vehicles, and renewable energy infrastructure.
At the same time, supply expansion is constrained by long development timelines, capital intensity, environmental and social considerations, and concentration at specific stages of the value chain. These constraints mean that demand growth cannot be met simply by scaling existing supply arrangements. New projects, new processing capacity, and new recycling infrastructure must all be developed, financed, and brought into operation within timeframes that are short relative to historical norms.
This mismatch between demand trajectories and supply constraints is what makes CRM strategically significant. It is not simply that materials are important; it is that their availability is uncertain, their supply is concentrated, and the mechanisms for expanding supply are structurally constrained. For policymakers, this creates a rationale for intervention. For industry actors, it creates investment opportunities but also significant risks. For financial institutions, it requires new frameworks for assessing long-term viability and resilience.
From materials to systems
Understanding what CRM are is only the first step. Criticality assessments identify which materials warrant attention, but they do not explain why supply challenges persist or how they can be addressed. Supply outcomes depend not only on the characteristics of individual materials but on how they move through global value chains and how those chains are shaped by policy, geopolitics, environmental and social constraints, and project finance considerations.
For this reason, the sections that follow focus on the CRM system as a whole. They examine how value chain structures create bottlenecks and dependencies, how policy and regulatory frameworks enable or constrain investment, how geopolitical dynamics shape strategic exposure, how environmental and social constraints determine project viability, and how project finance considerations act as a final filter on which projects ultimately proceed.
Criticality is the entry point for understanding CRM, but it is not the destination. The real challenge lies in translating criticality assessments into durable supply outcomes, and that requires a system-level perspective that integrates technical, economic, regulatory, geopolitical, and financial dimensions. The framework presented in the following sections is designed to support that integration.