U.S. efforts to strengthen critical-mineral supply chains have reduced China’s share of rare-earth refining, but China’s broader position in mineral processing remains strong. International Energy Agency data cited in a September 15 report showed China’s average share of non-rare-earth critical-mineral refining increased from 70% in 2023 to 72% in 2025.

Key Takeaways

• U.S. and Malaysian investment reduced China’s rare-earth refining share from more than 90% in 2023 to 85% in 2025.
• China’s average share of non-rare-earth critical-mineral refining rose from 70% to 72% over the same period.
• China processed 70% to 95% of global lithium, cobalt, phosphate, manganese and graphite in 2025.
• The U.S. has pursued domestic production, international partnerships, government financing and mineral stockpiling.
• The International Energy Agency forecasts global critical-mineral demand will at least double by 2040.

U.S. Investment Reduces China’s Share of Rare-Earth Refining

Investment in rare-earth refining by the United States and Malaysia helped reduce China’s share of that segment from more than 90% in 2023 to 85% in 2025, according to International Energy Agency data cited in a September 15 report.

The change shows that additional refining capacity outside China has reduced concentration in the rare-earth segment. The reduction, however, has been narrower than the overall U.S. effort to diversify critical-mineral supply chains.

The IEA also projects that China will retain a large share of rare-earth refining even if all planned projects worldwide are completed as scheduled. Under that scenario, China’s share of rare-earth refining is projected to fall to between 70% and 73% by 2035.

The figures distinguish progress in rare-earth refining from the broader critical-minerals supply chain. While China’s share of rare-earth refining has declined, its position in other mineral-processing markets remains strong.

The distinction matters because critical minerals are used across several industrial applications. Magnet rare earths are used in wind turbines, while yttrium is used in solar converters and capacitors. Graphite, cobalt, manganese and nickel are used in battery energy-storage systems.

The IEA forecasts that global demand for critical minerals will at least double by 2040. The agency attributes the expected increase largely to energy technologies, including battery storage, solar and wind power, electricity networks and electric vehicles.

China’s Broader Mineral Processing Share Remains High

China’s average share of refining for critical minerals other than rare earths increased from 70% in 2023 to 72% in 2025, according to IEA data.

The increase means diversification has not reduced China’s overall position across critical-mineral processing. Refining remains a key part of the supply chain because minerals extracted in one country may still require processing elsewhere before they can be used in manufacturing.

China processed between 70% and 95% of global lithium, cobalt, phosphate, manganese and graphite in 2025. The concentration gives China’s processing industry a substantial role in the supply of materials used in batteries and other energy technologies.

Graphite is among the minerals identified by the IEA as exposed to global supply vulnerabilities. Cobalt, magnet rare earths and yttrium are also listed among minerals facing significant supply exposure.

Battery materials provide a direct example of the concentration. China produced 98% of lithium iron phosphate cathode materials and 80% of global battery cells in 2025, according to the IEA data cited in the report.

China’s position extends beyond individual minerals to the midstream and downstream stages of battery production. This creates a distinction between securing mineral resources and establishing the processing capacity needed to turn those resources into materials for manufacturing.

The U.S. strategy therefore involves more than increasing domestic mining. Expanding refining and processing capacity is necessary to reduce reliance on external suppliers at stages further along the supply chain.

The supply-chain challenge also connects with domestic manufacturing capacity. A separate analysis of U.S. manufacturing supply chains describes federal efforts to identify gaps among domestic suppliers and expand the capacity of smaller manufacturers supporting new production facilities.

U.S. Government Expands Critical Minerals Support

The U.S. government has pursued several measures to increase domestic critical-mineral production and reduce dependence on China. The strategy includes funding for local production, equity investments in mining and refining companies, agreements with international partners and efforts to establish price floors for minerals.

The administration has said it signed or approved 160 critical-mineral deals totaling more than $40 billion since January 2025.

Project Vault is another part of the strategy. The initiative combines a $10 billion Export-Import Bank loan with nearly $2 billion in private-sector capital to create a critical-minerals stockpile.

The Export-Import Bank has also provided financing for domestic mineral production. One example is a $25 million loan supporting Westwater Resources’ development of battery-grade natural graphite in Kellyton, Alabama.

The Alabama project is designed to produce U.S. battery-grade coated spherical purified graphite from the adjacent Coosa graphite deposit. The first phase is designed to produce approximately 12,500 metric tons per year of the material used primarily in lithium batteries.

The Department of Energy also announced $500 million in funding across seven projects intended to expand critical-mineral and material processing for the battery sector.

One of those projects involves Lilac Solutions’ Great Salt Lake Lithium Project. The project received a $100 million grant and is expected to double U.S. lithium production capacity by 2028, producing 5,000 tonnes per year of battery-grade lithium carbonate.

The project could reach 20,000 tonnes per year in a second phase, according to the information cited in the report. That amount would be enough to support approximately 30 gigawatt-hours of domestic battery manufacturing annually.

Federal Financing Supports Domestic Processing

Critical-mineral projects require substantial financing before production can begin. Government funding can cover part of the capital required to develop mines, processing facilities and related infrastructure.

Analysts cited in the report said consistent government support is needed because projects take time to plan, develop and build. They also said grants alone do not provide all of the financing required to construct facilities.

The financing issue extends to demand. Guaranteed offtake and dependable demand can affect whether new processing capacity remains commercially viable after facilities are built.

Government policy also affects the financing environment for new facilities. The cancellation of previously awarded grants can reduce confidence in government support as a source of project finance, according to analysts cited in the report.

Demand-side measures can also affect the economics of new mineral production. The administration has ended tax credits for clean-energy projects and electric-vehicle purchases, changes that affect demand within parts of the critical-mineral production chain.

Refining Capacity Remains a Supply-Chain Bottleneck

The expansion of mining capacity does not by itself resolve dependence on foreign processing. Refining and processing capacity remains a bottleneck because facilities require time to develop and operate at commercial scale.

Critical-mineral supply chains can also be managed by reducing the amount of minerals required for individual products. Strategies cited in the report include substituting different materials, improving efficiency and redesigning products.

These approaches address supply exposure from the demand side rather than relying solely on new mining or refining projects.

The financing challenge is also relevant to other U.S. supply chains. Federal efforts to strengthen domestic manufacturing suppliers have focused on whether smaller companies have enough capacity to meet the requirements of expanding industrial operations.

China’s role in processing adds another layer of supply-chain exposure. Even where the United States develops domestic mining projects, manufacturers can remain dependent on overseas processing if sufficient refining capacity is not available domestically or through alternative suppliers.

Government support therefore covers several stages of the supply chain. Funding for extraction can increase access to raw materials, while processing investments determine whether those materials can be converted into forms required by manufacturers.

Export Controls Expose Supply-Chain Vulnerabilities

China’s use of export controls on critical minerals has provided a direct example of the risks associated with concentrated supply chains.

China introduced export controls on some heavy rare-earth elements in April 2025 and later expanded restrictions to products containing Chinese rare earths. In October 2025, China also expanded controls involving graphite and high-performance lithium iron phosphate cathode material.

The IEA has described these measures as targeting critical points across global battery supply chains.

China later suspended some of the expanded controls until November 2026. The continued possibility of restrictions has encouraged companies to hold additional inventories and accept higher prices, according to an energy-transition executive cited in the report.

A full implementation of China’s export controls would severely restrict the ability of countries outside China to produce batteries in the near term, according to the IEA. Additional restrictions on lithium iron phosphate cathode materials could also affect efforts to establish production outside China.

Battery Supply Chains Face Continued Mineral Exposure

Battery manufacturers and energy-storage developers are responding to supply-chain requirements by seeking greater diversification in their mineral sourcing.

Battery-storage developers are applying risk-management measures to reduce reliance on Chinese supply chains and comply with U.S. federal requirements governing supplies from prohibited foreign entities for certain tax-credit eligibility.

One approach involves separating suppliers across different stages of production and placing contractual compliance requirements on suppliers. Such arrangements can include warranties, indemnities and provisions covering replacement parts.

LG Energy Solution is also expanding battery production in North America and diversifying its supply chain, particularly for lithium iron phosphate cathode materials.

The company’s North American production is expected to reach 50 gigawatt-hours by the end of 2026. In August, it started operations at a new battery plant in Lansing, Michigan, which is intended to help U.S. customers meet domestic-content requirements.

The company also entered into a 10-year offtake agreement for 8,000 tons of U.S.-produced battery-quality lithium carbonate from Smackover Lithium.

The sourcing agreement adds a domestic mineral supply component to the company’s battery operations. It also illustrates the role of long-term offtake arrangements in supporting new mineral production.

A related report on the 2027 critical minerals deadline details new procurement restrictions affecting certain magnets, tantalum and tungsten and the additional supply-chain requirements facing contractors and lower-tier suppliers.

The broader supply-chain data remains concentrated in processing. China’s share of critical-mineral refining outside rare earths increased between 2023 and 2025, even as U.S. and Malaysian investment reduced China’s position in rare-earth refining.

For U.S. critical minerals, the distinction between mining, refining and downstream manufacturing remains central to supply-chain development. The available figures show measurable progress in rare-earth refining diversification alongside continued concentration across several other critical-mineral processing markets.

Frequently Asked Questions

What are critical minerals?

Critical minerals are materials considered important to industrial and energy technologies and vulnerable to supply disruptions. The minerals referenced in the report include lithium, cobalt, graphite, manganese, nickel, rare earths and yttrium.

How much of critical-mineral refining does China control?

China’s average share of refining for critical minerals excluding rare earths increased from 70% in 2023 to 72% in 2025. It also processed between 70% and 95% of global lithium, cobalt, phosphate, manganese and graphite in 2025.

What is the U.S. doing to strengthen critical-mineral supply chains?

The U.S. government is supporting domestic production and processing through funding, equity investments, international agreements, mineral stockpiling and other measures. The Department of Energy has also provided funding for projects involving critical-mineral and battery-material processing.

Which critical minerals face supply vulnerabilities?

The IEA identifies graphite, magnet rare earths, yttrium and cobalt among minerals exposed to global supply vulnerabilities. Lithium, manganese and nickel are also important inputs for battery energy-storage systems.

Why is mineral refining important to U.S. battery manufacturing?

Mining provides raw mineral resources, but refining and processing convert those resources into materials that manufacturers can use. Concentrated processing capacity can therefore create supply constraints even when mineral resources are available elsewhere.