Export controls on critical minerals are increasing the risks to global supply chains across industries from energy to aerospace, defence and advanced manufacturing.
The analysis from the International Energy Agency (IEA) says that export controls like the ones set to be introduced by China on lithium-ion batteries, effective from 8 November, could put pressure on global battery supply chains. Expanding on previous measures, the controls include battery cells and packs for high-performance applications, cathode precursors, an expanded scope of anode materials, a broader coverage of lithium iron phosphate (LFP) cathode materials and battery and material production equipment and technologies.
The IEA said: “China currently dominates the midstream and downstream supply chains for batteries globally, with shares of 80% in many key areas. In some segments such as precursor cathode materials and LFP cathode materials, China maintains a near monopoly, with shares of 95% or above. This exceptional concentration creates multiple points of vulnerability across the supply chain.”
The IEA continued: “In the short term, if export approvals for companies are delayed, the international market may face tight supplies of battery materials. This could lead to increased costs for batteries, with potential knock-on effects on the affordability of electric vehicles and storage.” It added: “The new restrictions also create risks for strategic sectors which depend on lithium-ion batteries, such as defence, aerospace and some medical applications.”
However, the IEA cautioned: “There remains some uncertainty over enforcement of the latest export controls. As the geopolitical context continues to evolve, trade negotiations could alter the scope or stringency of the restrictions. Nevertheless, the latest developments underline the crucial importance of advancing diversification to ensure the long-term resilience of global supply chains.”
Korea is currently the leading source of battery material production outside of China, and the project pipeline, the IEA said, indicates that it is set to remain the largest mid-stream diversification hub by 2030. However, the country relies on imports of precursor cathode materials and other upstream inputs from China.
Based on existing pipelines, the US and Europe are set to lead the expansion of battery production capacity, each accounting for around 40% of output outside of China by 2030. The US has several midstream projects under development, notably LFP cathode and anode materials which could mitigate vulnerabilities in the supply chain, though these remain insufficient to offset reliance on Chinese supplies, the IEA says.
Beyond batteries and their materials, the report noted China’s leading position in minerals, accounting for 19 out of 20 important strategic minerals, and in its role as a leading refiner it has an average market share of 70%.
The supply of rare earths remains among the least geographically diversified among all critical minerals. For rare earths used in magnets for various industries - notably neodymium, praseodymium, dysprosium and terbium - China accounted for around 60% of global mining output in 2024, followed by Myanmar, Australia and the US.
Twenty years ago, China accounted for some 50% of sintered permanent magnets commonly used in cars, wind turbines, industrial motors, data centres and defence systems. Today the share stands at 94%, making China the world’s single largest supplier of the component critical to the manufacturing of the most powerful motors needed for many critical applications, the IEA’s commentary said.
With such a high market concentration, the IEA says, this leaves global supply chains in strategic sectors vulnerable to potential disruption. The commentary highlights that on 4 April this year the Chinese Government introduced export controls on seven heavy rare earth elements as well as related compounds, metals, and magnets. “As export volumes fell sharply in April and May, many car makers in the US and Europe, and elsewhere struggled to obtain permanent magnets, with some forced to cut utilisation rates even temporarily shut down factories,” the commentary explains.
It adds that even after trade volumes recovered, rare earth prices in importing countries remained elevated – with European prices reaching up to six times those in China – hurting the cost competitiveness of rare earth-based products manufactured outside of China.
More recently, on 9 October, the Ministry of Commerce of China announced further export controls on rare-earth elements and related equipment and technologies. “The new controls require foreign companies to obtain a licence from China to export ‘parts components and assemblies’ containing Chinese sourced rare earth materials or produced using Chinese rare earth technologies.” The rule was applied with immediate effect, the IEA said.
These issues are set to be compounded when from 1 December this year, the controls are due to be escalated to include ‘internationally made’ products containing Chinese sourced materials, or manufactured using Chinese technologies, even if they are traded domestically.
Further reading
- Critical minerals: Action needed to reduce use and improve sustainability
- Critical minerals: UK lags, China dominates, and parliament demands a plan
- Battery company plans new £1 billion gigafactory
- Lithium-ion battery recycling: Measuring the environmental benefits
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