What is the race for critical raw materials about?
The race for critical raw materials refers to the intense competition among countries and industries to secure access to vital raw materials that are essential for various sectors of the economy.
These materials, known as critical raw materials, are of great economic importance and face a high risk of supply disruption.
Critical raw materials are typically rare or scarce and are in high demand due to advancements in technology and the emergence of new industries.
The race for these materials is driven by several factors. Firstly, their importance in the production of high-tech devices like smartphones, electric vehicles, and renewable energy systems has escalated their demand.
Secondly, there are geopolitical considerations, as countries seek to secure access to critical raw materials to bolster their national security and economic competitiveness.
This has led to competition and occasional tensions between nations.
Environmental concerns related to mining and extraction practices have also influenced the race for critical raw materials.
Sustainable strategies such as recycling, circular economy practices, and the development of alternative materials are being explored to reduce dependence on scarce resources.
To tackle these challenges, countries and organizations are diversifying their supply sources, investing in domestic production, promoting recycling initiatives, and researching substitutes or alternative technologies.
International collaborations and agreements are being pursued to ensure fair and stable access to critical raw materials.
How has China taken the top spot in critical raw materials?
China has solidified its position as a formidable force in the realm of critical raw materials, and several key factors have contributed to its rise to the top.
At the core of China’s success lies its abundant domestic reserves. The nation boasts significant reserves of various critical raw materials, such as rare earth elements, antimony, and tungsten, granting it a competitive edge in terms of production and control over the supply chain.
Furthermore, China’s prowess in production cannot be overlooked.
With substantial investments in mining and processing infrastructure, the country has become the world’s leading producer of numerous critical raw materials.
China’s strategy of vertical integration has also played a pivotal role. By controlling multiple stages of the value chain, spanning from mining and extraction to refining and manufacturing, China has enhanced its dominion over critical raw materials.
This integrated approach enables China to exert greater control and capture more value from these valuable resources. And this is the main reason China is now 15 years ahead of the global race.
The implementation of export restrictions on select critical raw materials has been another key element in China’s ascent. By imposing limitations on exports, China effectively limits the availability of these materials in the global market.
This maneuver not only helps maintain its strong position but also grants China the ability to influence prices and encourages foreign industries to establish manufacturing facilities within its borders.
Lastly, China’s strategic investments in critical raw material projects and companies globally have further bolstered its standing.
By securing access to resources beyond its borders and expanding its influence over global supply chains, China fortifies its position as a dominant player in critical raw materials.
Should you invest more or less in critical raw materials?
Investing in critical raw materials requires careful consideration of various factors to make informed decisions.
Market demand serves as a starting point, with the need to assess current and projected demand driven by factors like technological advancements, emerging industries, and government policies. Thorough research and evaluation of specific materials’ market outlooks are essential.
Another crucial aspect is analyzing the supply dynamics of critical raw materials. Factors such as production capacity, reserves, geopolitical influences, and potential disruptions should be considered to understand the availability and stability of supply.
China’s dominance in the market, means that the one player could shift the pricing and investments in critical raw materials in a huge way.
The EU and the US are trying all they can to connect their power to balance out the market and create more price competitiveness, which could cause more volatility in the market.
This could mean that the investments in the short term, profiting off of swings in the market, could become more frequent and cause experienced trader to profit off it.