What are critical minerals for the energy transition?

Critical minerals for the energy transition are materials essential for low-carbon technologies whose supply is concentrated in few countries, creating potential bottlenecks. Key minerals: (1) Lithium — essential for all lithium-ion batteries (EVs, grid storage); top producers: Australia (~47%), Chile (~26%), China (~15%); (2) Cobalt — used in NMC battery cathodes; Democratic Republic of Congo (DRC) produces ~70% of global cobalt; (3) Nickel — NMC batteries require high-purity Class 1 nickel; Indonesia (~37%) and Philippines (~13%) dominate; (4) Manganese — used in LMO and LMFP battery cathodes; South Africa dominates; (5) Rare earth elements (REE) — neodymium and dysprosium for permanent magnets in wind turbines and EV motors; China mines ~60% and processes ~90% globally; (6) Copper — critical for all electrification (EV motors, charging cables, transformers); Chile (~28%) and Peru (~11%) dominate.

Why does China dominate critical mineral refining?

China dominates critical mineral refining (not just mining) due to: (1) Decades of policy investment — China identified REE and battery materials as strategic sectors in the 1990s and invested systematically in processing capacity; (2) Lower environmental and labour standards historically allowed cheaper processing; (3) Integrated industrial clusters — refining, battery manufacturing, EV assembly are co-located in China, creating supply chain efficiencies; (4) State support — Chinese state enterprises (Ganfeng Lithium, CATL, Zijin Mining) received preferential financing and land access; (5) Early mover advantage — by the time Western governments recognised the strategic risk, Chinese dominance was entrenched. China refines approximately: lithium ~65%, cobalt ~75%, REE ~90%, nickel ~35-40% of global supply. The IEA estimates China's dominance in critical mineral refining will persist through at least 2030 even with accelerated Western diversification.

How do critical mineral prices affect EV battery costs?

Critical mineral prices directly affect lithium-ion battery pack costs. In 2022, lithium carbonate prices spiked to ~$80,000/tonne (from ~$7,000 in 2020) due to EV demand surge outpacing supply; battery pack costs temporarily increased. By 2024–2026, lithium prices collapsed to ~$10,000–15,000/tonne as new Australian and South American supply came online, contributing to battery pack cost falls. Cobalt prices fell from ~$95,000/tonne (2022 peak) to ~$25,000–35,000/tonne (2026) as NMC chemistry demand fell relative to LFP (lithium iron phosphate), which contains no cobalt. Nickel prices spiked to $100,000+/tonne in 2022 (short squeeze) before falling to ~$15,000–18,000/tonne. Battery chemistry trends — particularly the shift toward lower-cobalt and LFP batteries — are partly motivated by supply risk and price volatility in cobalt and nickel.

Critical Minerals & the Energy Transition 2026

Published 1 October 2026 · Updated 22 October 2026

As EVs replace petrol and diesel vehicles, critical minerals — lithium, cobalt, nickel, manganese, and rare earth elements — are increasingly called the "new oil": essential commodities whose geographically concentrated supply creates strategic vulnerabilities comparable to crude oil dependence. In 2026, supply chains for these materials are under intense geopolitical scrutiny, investment pressure, and policy intervention globally.

For EV battery cost context, see our EV battery cost 2026. For how this affects the energy transition agenda, see our World Energy Congress 2026. For the carbon credit markets connecting minerals to climate policy, see our carbon credit glossary entry.

Critical mineral supply concentration

Mineral	Key use	Top 3 mine producers	Top refiner
Lithium	All Li-ion batteries	Australia 47%, Chile 26%, China 15%	China ~65%
Cobalt	NMC battery cathodes	DRC 70%, Russia 5%, Australia 4%	China ~75%
Nickel (Class 1)	NMC batteries, EV motors	Indonesia 37%, Philippines 13%, Russia 11%	China ~35–40%; Indonesia rising
Manganese	LMFP battery cathodes	South Africa 37%, Gabon 20%, Australia 16%	China ~90%
Rare earths (NdPr)	Wind turbine and EV permanent magnets	China 60%, USA 15%, Australia 8%	China ~90%
Copper	All electrification; EV motors/cables	Chile 28%, Peru 11%, DRC 9%	Distributed; China largest single processor

China's processing dominance

Mining concentration is only one dimension of supply risk — processing concentration is often more strategically significant:

Australia mines the most lithium globally but sends ~80% to China for processing; China controls the conversion from spodumene ore to battery-grade lithium carbonate/hydroxide
DRC mines ~70% of cobalt; the majority is exported to China for refining into cobalt sulphate for battery precursor manufacture
China processes ~90% of global rare earth elements — including the separation chemistry that isolates individual REE from mixed ore

Western governments (US Inflation Reduction Act, EU Critical Raw Materials Act) are investing in domestic and allied-nation processing capacity, but building a refinery takes 5–10 years. For a 2030 timeline perspective, see our EV battery cost 2026 analysis.

Critical mineral price trends 2020–2026

Mineral	2020 price (approx.)	2022 peak	2026 (approx.)	Driver of change
Lithium carbonate ($/t)	~$7,000	~$80,000	~$10,000–15,000	Supply surge; demand below peak fear
Cobalt ($/t)	~$33,000	~$95,000	~$25,000–35,000	LFP battery shift reducing cobalt demand
Nickel ($/t)	~$13,500	~$100,000+ (short squeeze)	~$15,000–18,000	Indonesian supply surge; market manipulation in 2022
REE (NdPr oxide, $/kg)	~$50	~$150	~$60–80	China export policy; new Australian supply (MP Materials)

Geopolitical risks and policy responses

China export restrictions: China imposed export controls on gallium and germanium (2023), graphite (2023), and some REE processing materials — signalling willingness to weaponise critical mineral dominance
US IRA Critical Minerals: The US Inflation Reduction Act requires increasing percentages of EV battery minerals to come from US or Free Trade Agreement partners; Chinese-sourced minerals face disqualification from EV tax credits from 2025+
EU Critical Raw Materials Act: Sets targets for EU domestic extraction (10% of annual consumption), processing (40%), and recycling (15%) by 2030 for strategic minerals
Recycling as security: Battery recycling (recovering lithium, cobalt, nickel from end-of-life EV packs) is increasingly viewed as a domestic "urban mining" resource — with major investments by Umicore, Li-Cycle, and Redwood Materials

The "Friends-horing" strategy
Western governments are pursuing "friend-shoring" (or "ally-shoring") of critical mineral supply chains — preferentially sourcing from geopolitically aligned nations rather than lowest-cost suppliers. Key bilateral agreements: US–Canada Critical Minerals Partnership; EU–Canada Strategic Partnership on Raw Materials; Minerals Security Partnership (US-led, 14 nations). Australia, Chile, Canada, and Namibia are the primary targets for Western investment in lithium, copper, cobalt, and rare earth supply chains. This strategy accepts higher costs (allied-nation production is often 20–50% more expensive than Chinese-processed materials) in exchange for supply security. The COP31 climate agenda and critical minerals geopolitics are deeply intertwined — see our COP31 2026 event preview.

Frequently asked questions

What are critical minerals for the energy transition? Critical minerals for the energy transition are materials essential for EVs, batteries, wind turbines, and solar panels whose supply is geographically concentrated. Key minerals: lithium (batteries — Australia 47%, Chile 26% of mine supply), cobalt (NMC batteries — DRC 70%), nickel (NMC — Indonesia 37%), rare earths (magnets — China 60%), and copper (all electrification — Chile 28%). China dominates refining of most categories.: Critical minerals for the energy transition are materials essential for EVs, batteries, wind turbines, and solar panels whose supply is geographically concentrated. Key minerals: lithium (batteries — Australia 47%, Chile 26% of mine supply), cobalt (NMC batteries — DRC 70%), nickel (NMC — Indonesia 37%), rare earths (magnets — China 60%), and copper (all electrification — Chile 28%). China dominates refining of most categories.
Why does China dominate critical mineral refining? China dominates processing (not just mining) due to 30+ years of strategic policy investment, integrated industrial clusters (mining → processing → battery → EV), state financing support, and historically lower regulatory costs. China refines ~65% of lithium, ~75% of cobalt, ~90% of REE globally. Even Australian-mined lithium is mostly sent to China for processing. Western catch-up requires 5–10 years to build new refining capacity.: China dominates processing (not just mining) due to 30+ years of strategic policy investment, integrated industrial clusters (mining → processing → battery → EV), state financing support, and historically lower regulatory costs. China refines ~65% of lithium, ~75% of cobalt, ~90% of REE globally. Even Australian-mined lithium is mostly sent to China for processing. Western catch-up requires 5–10 years to build new refining capacity.
How do critical mineral prices affect EV battery costs? Lithium carbonate spiked to ~$80,000/t in 2022 (from $7,000 in 2020), temporarily pushing battery costs up, before collapsing to ~$10,000–15,000/t in 2024–2026 as supply expanded. The LFP battery shift (no cobalt) reduced cobalt demand and prices. Lower mineral costs are a key driver of battery pack cost falling to ~$80–120/kWh in 2026 — making EVs approaching price parity with ICE vehicles.: Lithium carbonate spiked to ~$80,000/t in 2022 (from $7,000 in 2020), temporarily pushing battery costs up, before collapsing to ~$10,000–15,000/t in 2024–2026 as supply expanded. The LFP battery shift (no cobalt) reduced cobalt demand and prices. Lower mineral costs are a key driver of battery pack cost falling to ~$80–120/kWh in 2026 — making EVs approaching price parity with ICE vehicles.