Critical Minerals are minerals that are essential to the economy and national security, capable of dealing a blow to the national economy if the supply chain is disrupted. In 2024, the United States Geological Survey (USGS) designated 50 minerals — including lithium, cobalt, rare earth elements, and nickel — as critical minerals. Beyond the United States, countries around the world separately designate their own lists of critical minerals according to their industrial structures and strategic needs.
The concept of critical minerals has gained attention due to the transition to clean energy and the advancement of digital technologies. Clean energy technologies such as electric vehicle batteries, wind turbines, and solar panels require six times more critical minerals than conventional fossil fuel-based systems. Advanced technology industries such as semiconductors, 5G communications, and AI data centers are also highly dependent on specific minerals. The problem is that the production and processing of the minerals needed in this process are concentrated in only a handful of countries. China accounts for 90% of rare earth processing and over 70% of cobalt refining, while the Democratic Republic of the Congo is responsible for 70% of global cobalt production.
[Critical Minerals(Critical Minerals) © ESG.ONL/ESG Today]
Numerous countries are pursuing various policies to stabilize the critical mineral supply chain in order to reduce mineral dependence on specific third countries such as China. In 2022, the United States granted tax credit benefits for electric vehicles using North American-sourced critical minerals through the Inflation Reduction Act (IRA), and the EU enacted the Critical Raw Materials Act (CRMA) in 2023, setting a target of expanding the mineral processing share to 40% by 2030. In South Korea, the Ministry of Trade, Industry and Energy designated 33 types of critical minerals essential to advanced industries in February 2023 when it announced its ‘Critical Mineral Securement Strategy.’ In addition, it set a target of reducing the Chinese import dependence for critical minerals essential to the secondary battery and semiconductor industries — such as lithium, cobalt, and graphite — from the current 80% range to the 50% range by 2030.
The race to secure critical minerals is also closely linked to ESG issues. The issue of child labor at cobalt mines in the Democratic Republic of the Congo is continuously raised in connection with the mineral extraction process, and lithium mining is accelerating water resource depletion in arid regions such as Chile and Argentina. Ensuring that the clean energy transition does not generate additional environmental and social costs is emerging as a new challenge in the management of critical mineral supply chains.
by Editor O