IEA: Investment in Critical Minerals Has Fallen 9%

Mining operations face pressure to expand output as demand for critical minerals accelerates. The energy transition requires copper and lithium while defence and aerospace sectors need rare earth elements. Semiconductor production depends on materials like gallium and germanium.

China dominates production of many critical minerals. Governments and companies have been working to build alternative supply chains. The International Energy Agency published its Global Critical Minerals Outlook 2026 report which examines supply chain risks and diversification efforts.

The report shows how critical minerals underpin multiple sectors simultaneously. Electric vehicle manufacturers are competing with renewable energy projects for the same materials. Defence contractors require secure access to rare earths for advanced systems. Technology companies need consistent supplies for consumer electronics production.

Concentration threatens mining expansion

Mining output remains geographically concentrated despite diversification efforts. According to the report, Indonesia and China were responsible for more than 75% of total growth in refined supply. Indonesia leads nickel refining while China refines many other materials.

This concentration creates vulnerabilities across global supply chains. Single-country dependencies mean disruptions in one location can affect multiple industries worldwide. Mining operations in other regions struggle to compete with established infrastructure and lower production costs.

Prices of critical minerals rose in 2025 and early 2026, the report says. Tighter supply chain conditions caused these increases.

Investment in mining projects fell by 9% in 2025. Public finance commitments for critical mineral projects reached US$65bn between 2023 and 2025, a fourfold increase. Copper and lithium projects have narrowed the gap between projected demand and anticipated supply.

However, funding for other critical minerals remains insufficient. Rare earth projects face higher technical barriers and longer development timelines. Cobalt and graphite operations require substantial capital investment before production begins.

"The conversation around critical minerals has changed markedly over the past year. They're no longer viewed solely through the lens of the energy transition, but increasingly they have become a defining test of industrial competitiveness, economic security and supply chain resilience," says Joachim Braun, Global Division President of ABB's Process Industries division.

Processing capacity lags mine output

Mining operations are expanding faster than refining and processing facilities. The report says that refining capacity will only meet 66% of expected rare earth mine output by 2035. Magnet production capacity will only meet one-third of mine output.

This gap between mining and processing creates bottlenecks throughout supply chains. Raw materials may be available but cannot be converted into usable forms. Manufacturing sectors face delays even when mine production increases.

Export controls have disrupted mining supply chains. China imposed rare earth export controls in April 2025. Some automakers had to suspend operations or reduce production according to the report.

"Our latest analysis shows that vast amounts of economic value depend on relatively small volumes of critical minerals, whose supply chains remain highly concentrated and are therefore vulnerable," says Fatih Birol, International Energy Agency Executive Director.

"Yet there are encouraging signs of progress – including in rare earth supply chains – where we see targeted policies and investment support starting to make a difference. And while diversified supply can come at a higher cost, this can be viewed as a mineral security premium in a time of geopolitical uncertainty – a form of economic insurance against major supply risks."

Existing operations offer expansion potential

Mining operations can increase output without building new facilities, the report says. Many mining sites extract only a portion of available minerals, and advanced processing technologies can recover additional materials from existing ore bodies. Tailings from previous operations may contain valuable minerals that earlier methods could not extract economically.

"The paradox is that while governments are working to diversify sources of critical minerals, production and refining remain highly concentrated by location. New supply is essential, but most projects take well over a decade to reach production while demand continues to accelerate," says Joachim.

"That means we need to think differently. Expanding supply isn't only about building new capacity; it's also about unlocking more value from the operations we already have. Existing mines represent one of the fastest opportunities to strengthen supply chains by improving productivity, recovery, energy efficiency and operational resilience."

The report notes that critical mineral costs make up approximately 25% of battery cell costs but only 3% of the average electric vehicle price. Diversification costs could, therefore, have minimal impact on consumers.

Technology and workforce challenges persist

Mining operations face equipment access limitations outside China. Rare earth processing equipment is not widely available. Governments and mining companies need to invest in this technology, according to the report.

Technical expertise for critical mineral processing remains concentrated in established production regions. Training programmes take years to develop qualified personnel.

Skilled workforce availability constrains mining expansion. The IEA suggests governments should structure policies to distribute improvement costs across governments, industries and consumers.

Reserve production or co-located stockpiles of low-volume materials could also reduce bottlenecks.

Mining operators are implementing automated machinery to improve safety and efficiency. Electrification and digitalisation are being integrated into operations.

"ABB's Mining's Moment research found that 77% of mining leaders believe electrification, automation and digitalisation must work together to achieve sustainable transformation. These technologies are helping operators improve productivity, extend asset life and reduce energy intensity, strengthening supply before new capacity comes online," says Joachim.

"Ultimately, access to critical minerals will remain important, but competitive advantage will increasingly be determined by how intelligently those minerals are produced. The countries and companies that invest in productivity, resilience and sustainable operations today will be the ones best positioned to meet tomorrow's demand."