Critical Minerals Race 2026: Lithium, Rare Earths & Cobalt

By early 2026, the critical minerals race has escalated from an industrial-policy dispute into the defining front of global geoeconomic competition. China now controls more than 60% of rare earth processing and about 70% of lithium refining, according to 2026 assessments, while the United States and European Union race to finance alternative mines in Australia, Canada, and Chile. New tariffs, export controls, and stockpiling initiatives are redrawing supply chains and reshaping alliances for the next decade.

The Geopolitical Battlefield

The critical minerals race for lithium, cobalt, and rare earths is no longer about mining volumes alone; control of refining, processing, and battery materials now determines strategic advantage. UNCTAD projects lithium demand could rise more than 350% by 2040, while graphite demand grows over 130%. Mining M&A hit about $21.6 billion in Q1 2026, the strongest first quarter since 2023. This minerals contest intersects with broader energy shifts: the UAE exits OPEC on 1 May 2026, and yuan-denominated oil contracts have reached roughly 24% of daily Brent volumes.

China's 15th Five-Year Plan as Geoeconomic Leverage

China's 15th Five-Year Plan (2026–2030) explicitly elevates rare earths and critical minerals into instruments of state power. Beijing controls an estimated 85–90% of rare earth processing and 99% of heavy rare earth refining. The plan tightens export controls, building on October 2025 restrictions that targeted 12 of 17 rare earth elements, finished magnets, and processing technologies. Since 2025, licensing approval rates for European firms have fallen below 25%, while prices outside China for some materials spiked sixfold.

Western Countermoves: FORGE and Project Vault

The United States responded in February 2026 with FORGE initiative, a 54-country preferential trade-and-investment zone with price floors, and Project Vault, a $10 billion strategic critical minerals reserve backed by EXIM. Eleven new bilateral agreements—including Argentina, Morocco, and the DRC—brought the total to 21 in five months. However, analysts warn rebuilding Western processing capacity could take 20–30 years, against a 12–18 month geopolitical window.

EU's Critical Raw Materials Act and Strategic Autonomy

The EU's Critical Raw Materials Act entered into force on 23 May 2024 and sets 2030 targets: 10% domestic extraction, 40% processing, and 25% recycling, with no more than 65% of any strategic raw material from one country. By 2026, the EU selected 60 Strategic Projects, but over 80% of European firms still depend on Chinese supply chains. Europe relies on China for 98% of rare-earth needs and 97% of lithium supply.

Impact on Global Supply Chains and Alliances

The scramble for lithium, cobalt, and rare earths is forging new alignments. Australia and Canada announced a Critical Minerals Partnership in March 2026, integrating exploration, extraction, processing, and stockpiling. Australia's $4 billion Critical Minerals Facility and $1.2 billion Strategic Reserve complement Canada's sovereign fund. Gulf states and Chile are also attracting US and European capital. Meanwhile, China's June 2026 export controls barred ten U.S. companies, cutting U.S.-bound rare earth shipments to zero in May 2026.

Expert Perspectives and Risks

Analysts caution that a full enforcement of China's controls could put $6.5 trillion of downstream production at risk. “The window for building Western processing capacity is narrowing to 12–18 months,” a Brussels-based trade analyst said. “Without accelerated investment, the West will trade one dependency for another.”

Frequently Asked Questions

What are critical minerals?

Critical minerals—lithium, cobalt, rare earths, graphite, nickel—are essential for clean energy, defense, and digital technologies and face high supply risk.

Why is China dominant in critical minerals?

China invested roughly $57 billion since 2000, building 85–90% of rare earth processing and about 70% of lithium refining capacity, then using export controls as leverage.

What is the EU Critical Raw Materials Act?

The CRMA is a 2024 EU regulation targeting 10% domestic extraction, 40% processing, and 25% recycling by 2030.

What are FORGE and Project Vault?

FORGE is a 54-nation US-led forum with price floors. Project Vault is a $10 billion strategic critical minerals reserve backed by EXIM.

Conclusion: A Decade of New Dependencies

By the end of 2026, the critical minerals race has produced a fragmented, friend-shored supply chain—but not a decoupled one. The next decade will be defined by whether the US, EU, and their partners can build Western processing capacity fast enough, or whether new dependencies on Gulf and Australian intermediaries simply replace old ones.