Critical Minerals, China, and Supply Chain Geopolitics

Host and TAG Senior Advisor Mira Rapp-Hooper sits down with the Financial Times journalist Camilla Hodgson for a clear-eyed look at the geopolitics of critical minerals. They break down where China is dominant across supply chains — from mining and processing to downstream products like magnets — why the West ended up with asymmetric dependence, and why reshoring is so hard. Hodgson explains the policy ideas gaining traction, including price floors and incentives, and how "friendshoring" partnerships could reduce risk without full decoupling. 

What Comes Next with Mira Rapp-Hooper is produced by Rivan Dwiastono, executive produced by Lauren Dueck, with editorial input from Prashant Jha. It contains music by Cody Martin via Soundstripe. 

What Comes Next is a production of The Asia Group, and is powered by TAG AI, TAG's geopolitical decision engine for businesses.

Transcript

SPEAKER_01 0:00

Yeah, I think it's probably just impractical to entirely decouple from such a major economy that is so prominent in this space. If the war is still going and transport is still stuck in another four weeks, then you might start to see metals producers not able to produce as much or or any.

SPEAKER_00 0:24

I'm really excited to speak with today's guest. Because for the last many years, and in particular since the April 2nd Liberation Day tariffs, we as geopolitical analysts have become increasingly focused on the question of how critical minerals, critical minerals dependencies, and critical minerals supply chains are shaping our world. In particular, since the Chinese government decided to turn off the critical minerals taps after President Trump's April 2nd Liberation Day tariffs, it has become evident to businesses and risk watchers everywhere that the United States and its allies and partners are deeply dependent on China for critical minerals mining and many major metals on which industry itself is heavily reliant. Camilla Hodgson is a reporter at the Financial Times, where she covers critical mineral supply chains and critical mineral policy making. She's also previously covered big tech for the Financial Times. Let's give a listen. Camilla Hodgson, I'm thrilled to welcome you to what comes next today. Thanks so much for being here. I'm thrilled to be here. It's great to have the opportunity to chat with you today because you have really deep expertise on a subject matter that's of great interest, both to geopolitical analysts and to businesses, increasingly, and an issue that has increasingly transfixed us over the course of last year. And that, of course, is critical minerals, critical mineral supply chains, and the role that these increasingly play in geopolitics. I'd love to start our conversation today, Camilla, by just walking through some of the basics. Because although we have all become increasingly focused on critical minerals, to some degree we don't totally understand the genesis of the paradox or the challenge that we find ourselves in now. So I want to start out just by asking you how dependent the United States and many of its partners are on China for critical minerals across the full chain from mining to finished products and what that dependency actually means in our political relationship.

SPEAKER_01 2:38

Well, it's a great question. I guess it's really the fundamental starting point for so much of this, uh, particularly as you say, in which in a very geopolitical and quite fraught world. Um, I guess the first thing to say is it's not easy to put hard numbers on it, or or at least it is, but the the numbers are very country specific, they're metal specific. But in broad terms, really what we're talking about is that China is a major producer of a whole range of metals, think copper, aluminium, lithium, rare earths, lots more things that are unpronounceable. Um and they they mine them, they process them, which is kind of taking the mine stuff and turning it into stuff that manufacturers can use. Um, they also make finished products like magnets and other things that are very rich in metals. Um the numbers are very variable. It can be anything from sort of 50% up to 80 or 90% that China controls of a given supply chain. And you can break that down into, you know, for example, the amount of uh global processing capacity that China has in lithium is very high, but they don't necessarily mine all the lithium. So you can kind of fragment it out. But big picture, China is extremely dominant across these supply chains. And what that means is the West, the US in particular, but it's not just the US, has sort of woken up to this uh what they see now as a vulnerability. I mean, this has been the case for a long time now. It this isn't a news thing, but it hasn't been seen in quite this light. And what's happening now is in a much more tense world with a lot more kind of protectionism and concerns about having what you need in your own country so that you're kind of in control of your own destiny. That has kind of lit a fire under this question of how do we reduce dependency on China? And, you know, it's important in peacetime, it's particularly important in wartime. If you feel like you can't trust uh, you know, your trading partners, I suppose that's kind of where this has become a real lightning rod.

SPEAKER_00 4:47

Very well said, Camilla. Um, and just for the sort of clarification sake of our listeners, you know, you mentioned the fact that the Chinese have varying levels of dominance across different metals and minerals. Correct to say that many of these metals and minerals are prevalent all over the world. However, the Chinese are able to mine, refine them more cheaply and at greater scale than many other countries are able to do.

SPEAKER_01 5:15

Yeah, there's a few different things in there. Um, yes, definitely. There are these metals all over the world that in different sorts of, you know, um geographic they're all over the place, and it's a variety of things in different places. But I guess what China has done is two things. One, they've taken a very long-term view of this sector, and over decades, they've put a lot of money into um building the mines, which takes absolutely years, decades, um, and then also all of the kind of midstream processing and refining, refining, etc. Um, it's harder, or it has been harder, I think, for Western companies to take that kind of a long-term view. And often, you know, they're tied to kind of quarterly earnings reports and shareholders looking for somewhat quick returns. Um, it's just a very different kind of mentality, I suppose. Uh in addition to that, the Chinese government has made this a priority because they they saw a long time ago that being in control of this metal was important for the growth of their own economy and ultimately has put them in a very powerful position now. So, yes, domestically in China, um, companies get help kind of subsidies, want of a better word, um, to yeah, make their cost of production cheaper. And that therefore makes it even more difficult for the West to catch up, even if we wanted to.

SPEAKER_00 6:40

So this is a critical point and brings us to one of the questions that I think about a lot, um, which is the basic question of how we got here to this point of just totally asymmetric dependency on China for our critical mineral supply chains. You know, you've already started to tell us the story, Camille, which of course is that the Chinese government saw years and years ago that it needed to have control over many of these metals and minerals for the sake of its own domestic industry. Um, but it's also the case that the United States and many of our partners have watched this dominance kind of accrue over the course of two decades or more. I remember, for example, the Chinese government first turning off the critical minerals taps on Japan, at least in my memory, back in 2008. So we actually have known for quite a while that China was kind of consolidating some of this control and that it could be used as political leverage. Um, and yet it's been very hard for us to kind of break this cycle and take the steps that would be needed to encourage the diversity that would give the Chinese government less of a hold on these critical supply chains. So help us understand a little bit better how exactly we got to this level of asymmetric dependency. And in particular, were there missed opportunities or critical junctures that the United States and others could have taken that would have changed the geopolitical picture that we're living with today?

SPEAKER_01 8:10

Yeah, I mean, it's you're right. This is certainly not new. And, you know, going back through the archives and there have been warnings over the years to the UK government, the US government, there are kind of nerdy, lengthy documents that probably nobody has read for 15 years that talk about, for example, rare earth um dependency and other things. So, yes, it's not that this is new and we we didn't know, and suddenly we're like, oh crap, and we've woken up to a problem. Um I guess it's a little difficult really to try to untangle why less why not very much has been done. I guess it's a little bit like COVID, though. We saw during COVID the risks that come with just-in-time supply chains in a very globalized world. And I guess some things changed after that, but it wasn't like we saw a radical kind of restructuring of trade flows and society, and particularly that kind of just-in-time, which still very much exists, and we're seeing now in the context of the Middle Eastern war, what happens when you have disruption in a major transport hub, setting aside all of the human costs, obviously. Again, we find ourselves in this completely paralyzed supply chain. Um so I don't know if it's a kind of, it's not like we didn't know. If it's just the people, it's so difficult, it's such a large problem to untangle. And I guess if you're I think part of the problem is if you're a major company and you source, I don't know how many metals and pieces from all over the world, it is such a gigantic undertaking to try to restructure that. And even let I mean, just trying to source it all from a region, let alone domestically, I think is such would be such a huge challenge. And it would require redesigning parts, it would be hugely expensive. Um, I so I think there are some practical issues there, and also just the lack of capacity in a lot of places, particularly um developed Western countries that obviously used to have a lot of manufacturing and over years offshored that. And maybe that seemed like a good idea at the time, but now often we find ourselves in these situations where actually we think, well, maybe it'll be good to have some more manufacturing here. And but now it's very difficult to bring it back. You have, you know, from NIMDEism to the cost of labour and energy in the UK, for example, versus Eastern Europe, even. And there are so many different examples you could draw on. But I think it's it's just very difficult now to kind of reverse that flow in the absence of really major government support or incentives. Um and it's a shame because I mean this is true across many industries, but in minerals, the US did used to have a very big mineral sector from mining, including some processing, uh magnet manufacturing. It's not like this is impossible, um, but a lot of that went offshore and it's just a very difficult thing, as we've seen in in other industries. Once it's gone, it's very hard to bring it back.

SPEAKER_00 11:18

And and, you know, I think you also dropped another hint for us earlier in this conversation, Camilla, which is that, you know, the Chinese government has had the opportunity to take a bit of a longer view of these things, has a different set of incentives that it can bring to the table when it comes to their industry and how they're prioritizing. And of course, in the case of the United States and many of our closest partners, we're talking about Western-style democracies that often have much shorter political time horizons. So if you're talking about undertaking the types of actions that would be necessary to drag some of those supply chains and manufacturing capacity um back to the United States or back to a partner country, it may often outstrip the time horizon of a given leader and therefore seem very, very difficult to achieve.

SPEAKER_01 12:01

Yeah, I think that is certainly true. And you see in other sectors of the economy as well. How many governments has the UK had in the last five years? I don't even know. We've lost count, but it does make it very hard to get anything done practically. And mining is a sector that really um lends itself, or not even lends itself, requires a very long time horizon. Um, because it just, even if the mine could be built overnight, which it can't be, it just takes a physical amount of time, a long amount of time, to pull stuff out of the ground, to process it, to take it to the relevant factories. Like none of that is a quick thing. And so it's difficult, I guess it's difficult being cynical for political leaders to have quick wins. Um, and so it maybe it hasn't been a priority for that reason. And that seems to be starting to change, but with this the sort of through the angle of national security and defense.

SPEAKER_00 12:59

Absolutely. So that sort of brings us to the next question, which is what do we do about it? You know, we have seen governments become more attuned to these dependencies and these symmetries in recent years. I was part of the Biden administration, um, where we did have a number of proposals that were intended to inspire collective action on critical minerals, although we didn't get nearly as far as we would have liked to. We've now seen just in the last couple of months, the Trump administration really try to supercharge some of these efforts and in a large minilateral fashion bring together a number of different allies and partners to try to reduce some of those dependencies on China. Um, but as you've already instructed us, the level of asymmetric dependency is so huge. And the process of changing these supply chains is so massive when it comes to rerouting industry, building mines, et cetera. Um, it certainly strikes many of us who've had policy exposure to these issues that this is a medium to long-term problem at best, even with a wide range of allies and partners inspired to try to do something about it. So help our listeners understand, if you would, Camilla, what policy actions from governments and steps by businesses would be necessary to meaningfully reduce some of these dependencies on China and to friendshore some of the critical mineral supply chains that we are also dependent on.

SPEAKER_01 14:30

Yeah. Well, I wish I had the answer. I think I'd be very rich if I did. Um, I guess there are different things that people are talking about and starting to do, and and we'll have to, I guess part of the problem is here that we have to just wait and see what works and um recalibrate over time. None of this is quick. But so, for example, in the US and um and in a couple of other examples, there was a big deal last year where the US government basically promised to pay a set price, a minimum price, for some rare earths uh mined by a company called MP Materials. And MP and other miners have a lot of other miners have said that's great because it gives us the certainty that we need in order to produce without the risk that uh more Chinese producers are going to come in and flood the market, undercut us, and then we go out of business and the whole thing's a disaster. Um so for the miners, that seems to work well. But then I've been speaking to people further down the supply chain, the people that use that mined material, and they've said, well, that's all very well, but it actually just means that what we buy now is more expensive. And so if I'm a Western, whatever it might be, magnet manufacturer, and I need to now buy mined material mined in the US that is more expensive, my magnet overall is also more expensive. And are the car makers that buy the magnets gonna pay more, or are they gonna continue to buy the Chinese cheaper magnets? You kind of you you you kind of shift where the burden is or or who faces the burden, perhaps, but there is still an asymmetry there. And that's the kind of thing that it's very difficult to try to figure out the answer to. It's it's like this incredible 3D riddle, and it probably requires a variety of different levers. So maybe you have the minimum price, but then you also have like a tax incentive for the manufacturer as well. So you kind of help both sides, but that's the kind of like knotty, boring kind of pencil on paper uh equation that you need to be trying to figure out.

SPEAKER_00 16:38

Um but absolutely necessary, right? I mean, I uh in the Biden administration in particular did a lot of work with our Australian colleagues um on these questions because, of course, the Australians have extremely deep mineral reserves, in particular on lithium. Um, but one of the challenges that we saw over the course of that four-year time period was that the prices on lithium cratered out underneath our Australian counterparts um due to the Chinese ability to produce the same mineral so much more cheaply. So even though, you know, as you say, it's it's a technocratic thing, it's also kind of a structurally necessary thing, by my vantage point, for allies to be entering into these really serious discussions about how you would set something like a price floor if you actually are to create a kind of secure, dependable critical mark minerals marketplace that's Frenchword.

SPEAKER_01 17:35

Yeah, I mean, I think people, I don't think everyone price floor seems to have become kind of a political question. Maybe any kind of government support is political by its nature. But I think not everyone agrees with the concept of a price floor. And some people have said to me, look, uh, you know, at the end of the day, these are businesses and they have to be able to stand alone as businesses. And maybe you give them interim support or like early stage support and then they have to fly on their own. But um anyway, I think you can argue about the tools, but probably it is fair to say some tools are needed. Um and also I think another thing is just that at the moment there's this the the kind of macro is we need to, or sometimes it's it's talked about as kind of we need to decouple from China. And I don't know that that is necessarily the case. I mean, they're the biggest consumer of most of these metals, a massive producer. I think probably building out an entirely parallel supply chain is impractical and maybe unnecessary. And equally, each country doesn't need their own supply chain. Like you don't need a UK versus a French versus a Chinese rare earth supply chain. But kind of matching things up in that example for of the um lithium for uh for the US with Australia, I think that's a good kind of frenchuring partnership model where some countries are going to be better at this thing, some countries are gonna be better at that thing, and have lower energy prices so manufacturing is easier, or whatever it might be. That seems to make a lot of sense, um, as opposed to it being this kind of every man for himself idea.

SPEAKER_00 19:13

So cooperatively reduced but not eliminated dependency on Chinese supply chains uh with a great deal of kind of overlap and coordination amongst allies and partners, basically.

SPEAKER_01 19:27

Yeah, I think it's probably just impractical to entirely decouple from such a major economy that is so prominent in this space. And and also you could argue it's not is that even desirable? I mean, you get into political questions about what is rational and reasonable and safe. Um, but also, you know, a lot of knowledge is gained through partnerships with Chinese companies or you know, that there are things that can be brought to the table, I think, probably in the spirit of cooperation as opposed to having a very hard line approach of we don't want any of this in our supply chains. Right.

SPEAKER_00 20:05

So if, I mean, if what essentially policymakers are saying today is that, you know, China controlling 90% of critical mineral supply chains is too much, they perhaps should be thinking about a number that's considerably lower than 90, but also certainly isn't zero. Is there some objective way to measure um whether it's a percent of dependencies or dependencies on particular minerals uh that should be tolerable? Or is this all such uncharted territory that we kind of have to feel it out as we go?

SPEAKER_01 20:37

Yeah, I think that is tricky. I think again, it's gonna be so kind of metal specific that it's hard to generalize. I guess the test is really in and some kind of emergency situation, whether that is a war or whether that's some kind of like power meltdown in Country X that you depend on, or whether it's some kind of transport issue, whatever it is. If there is some major disruption that means that you can't get the stuff that you need from Country X, are you going to be okay? And are there alternatives? I think that's kind of what the test is here. And that's what companies, car makers, and others have been trying to figure out um, you know, can we get magnets and the pieces for the magnets from elsewhere in the context of Chinese export restrictions? And I think everyone talks a lot about wanting to diversify and wanting to not just be stuck with one major supplier, but the extent to which actually that has changed in the last year, I I think is not huge. And partly it's because it's difficult and it's slow, but um yeah, I guess that's that's the test. If country X turns off the taps, whether it's China or anybody else, are you gonna be okay?

SPEAKER_00 21:52

And for how long?

SPEAKER_01 21:53

And for how long.

SPEAKER_00 21:54

Yeah. So that I mean that's a great transition to the next question that's been on my mind, Camilla. And I expect it's been on yours and Many of our listeners too. And that is the question of how conflict affects these supply chains. And in particular, conflict that may have been unanticipated. While, you know, implicitly, as the Trump administration, the Biden administration, whatever government is thinking about diversifying away from China, we are thinking about drawing down risk in potential crisis scenarios or geopolitically tense scenarios in which China may choose to turn off the tops as they did after the Liberation Day tariffs last year. But we've just seen another shock to global markets, which of course is the war in Iran. A war that, frankly, uh, you know, we saw sort of coming into view over the course of the last few weeks, um, but that would not have been foreseeable even a few months ago. Um, and that indeed, uh, you know, the Trump administration did not profess to have all that much of an interest in until very recently. So talk to us about how the conflict over the course of the last 10 days or so has affected mining and metals markets, and how all business interests with an eye on critical minerals should think about the role of conflict in disrupting those supply chains.

SPEAKER_01 23:14

Well, I think this is so emblematic of just the very globalized world that we still live in. Um there are kind of tiers, different tiers of effects. So some immediate impacts. Um, for example, in aluminium, uh a major industrial metal, a lot of that is produced in the Middle East. Um, and so there's been disruption because facilities have been um have just been hit, or they're not able to get the materials that they need. They can't import what they need and they also can't export what they produce. So uh a couple of companies have declared force majeure, meaning they can't service their contracts essentially. Um, and you've seen as a result the price of aluminium um jump because it just means there's less in the world that is available right now and less than people had expected. So that's um kind of an obvious immediate impact. Then there are second-tier things like a kind of almost the almost halting, it kind of been it's been going on and off, but transport in and out of the Middle East, whether it's um air freight or ships or other um that being dramatically disrupted in an area that is such a global transit hub, of course, has had a lot of different effects um across a real swathe of different industries. The oil price obviously has jumped um over the last week. Um, but then things like sulfur, which goes into making fertilizer and it also goes into making copper and nickel and uranium and other stuff. A lot of that comes out of the Middle East. And so it's been very difficult to uh for traders to get what they need. And as a consequence, you have potentially copper and nickel supplies at risk. It really depends how long this conflict lasts for and how long shipments are paused for. But you know, you might have a couple of weeks' worth of inventory of the sulfuric acid that you need. And so you might be fine if you know if the war ends tomorrow, that might not be a problem. But if the war is still going and transport is still stuck in another four weeks, then you might start to see metals producers not able to produce as much or or any. It just really depends what they have on hand. Um, so it's a real variety of things, and also just the kind of general panic and scramble and the inflationary impacts of higher energy costs, um, all of that feeds into a much more challenged supply chain for any business, really.

SPEAKER_00 25:50

Really helpful breakdown, Camilla, and I think super important for our listeners and companies in particular. Um, because while, of course, there is something sui-generous about a major conflict over and in Iran, um, given its role in oil and gas production, given its control over the Straits of Hormuz, um, given the sort of centrality of some of these supply chains in the Middle East, exactly as you have outlined, it is also the case that we are in the middle of a major geopolitical transition in the international system that we talk about often on this podcast. And part of what we've seen over the course of the last few years is the incidents of interstate conflict tick up considerably. Now, those conflicts aren't always going to affect supply chains the way that you just elegantly outlined, but it is really important that as businesses and those who evaluate risk plan and think about supply chains, they alongside that are pricing in the fact that conflict has this extremely disruptive effect and is likely to be a feature of the geopolitical picture that we see for quite a long time to come.

SPEAKER_01 27:00

Yeah, certainly. I think that's I don't know. It's difficult to know the extent to which people start to reroute things or fundamentally change their supply chains. I think definitely this combined with Ukraine, combined with COVID, it all we're being reminded again and again of the potential disruption and the risk in having these global supply chains that rely on things being delivered at exactly the right moment and it's difficult to replace and it's difficult or highly expensive to re-route, etc. But but equally it's um replanning the whole supply chain is difficult. And I think also in a lot of cases, for manufacturers that have a lot of metal in their supply chain, they often just don't know exactly what they have and where it comes from. They haven't mapped out that whole network, and the network is extensive, and probably when you start looking for problems, you find them, and that's a whole different question whether you actually want that information or not. But I think a lot of people actually just don't know the ins and the outs of it. So it's hard to manage.

SPEAKER_00 28:05

Well, that is exactly where I'd love to wrap up today, Camilla, um, which is this question of you know, if you're coming from the vantage point of a business, let's say an automaker, a battery manufacturer, or a defense contractor, what does it look like to manage risk in this environment? You've outlined elegantly for us the kind of fragility of just-in-time supply chains. Um, we've gone through in depth the reason why we've ended up with this extraordinary critical minerals and other metals dependency on China and the incredible Herculean task that it's going to take to kind of reduce, if not to eliminate that dependency going forward, as well as the fact that there are other geopolitical factors like this uptick in the risk of interstate conflict that are increasingly going to continue to put pressure on those existing supply chains. If you are in one of these key industries that is have exposed to critical minerals risk, what advice do you give to those businesses about how to manage the next several years while these dependencies almost certainly continue even as government action seeks to reduce them?

SPEAKER_01 29:17

Well, I'm just a lowly reporter. Um, but I mean, I don't know. I guess I would start with what is even in my supply chain. I think you need the map. You need to know where you're where you are to begin with. And then and this is what people have been talking about for a long time, this idea of diversifying car makers in particular have spoken about, for example, um not just relying on nickel from Indonesia, which is a massive producer and a low-cost producer. And they've spoken about it for ages. But when you actually ask whether they're making any changes and are they sourcing more from other countries, I mean, I haven't heard a lot of examples where the answer is yes. So, and I'm sure there are lots of good reasons for that. Um, or maybe there are, maybe, maybe it's just easier to not do it. I think it probably, I mean, it costs money, doesn't it? It costs time, it costs money, it's it's difficult, it's new business relationships, it's not just the status quo which can be comfortable until it's not. And so yeah, I think it's mapping and then figuring out if there are alternatives. Um, and probably kind of I think what's been interesting is seeing the business partnerships across supply chains. So um, you know, miners working more closely with processors, working more closely with magnet makers in an attempt to kind of stitch this supply chain together. Um and remains to be seen how, you know, how successful that will be in the West.

SPEAKER_00 30:44

But it seems like an interesting and promising uh position to take rather than every company being out there on their own. So creative, pragmatic partnerships amongst interested parties in the supply chain, um, kind of the wave of the immediate future, uh, even as the long-term future is uh challenging to effect, but governments give it a good college try.

unknown 31:06

Yeah.

SPEAKER_00 31:07

Yeah, why not? May as well start there and see what happens. Wonderful. Camilla Hutchin, it's been wonderful talking to you today. It's been great. Thank you. I'm struck as I reflect on my conversation with Camilla, how her lens as a journalist and a reporter really allows us to step back and take a longer view, both into how the United States and its partners have become so dependent on China for critical mineral supply chains, but also how difficult it will be to change those supply chains and those dependencies in the future. In particular, Camilla outlined beautifully a whole host of reasons why governments and industries often have shorter time horizons than those that are necessary to undertake the transformations that would really be required to reduce those dependencies and reroute our industries. So even as governments will remain intensely focused on this set of issues and trying to reduce dependencies on China in the immediate term, I also think Camilla did us great service in underscoring the fact that the risks inherent in these critical mineral supply chains are likely to be with us for at least several years to come. And in particular, in a world that is seeing a higher incidence of conflict and of competition, it is incumbent upon us as geopolitical analysts to price in the possibility of critical minerals and other supply chain disruptions as we think about how the international order is shifting under our feet. Today's episode was produced by Refund Dewey Astono, an executive produced by Lauren Dewick, with editorial input from Prashant Jaw. It contains music by Cody Martin via Soundstripe. What comes next is a production of the Asia Group and is powered by Tag AI, Tag's geopolitical decision engine for business. We'll see you on the next episode.