Deep dive: Critical minerals supply chains (lithium, cobalt, rare earths) — what's working, what's not, and what's next

Global lithium production reached 180,000 tonnes of lithium carbonate equivalent (LCE) in 2025, a 32% increase over 2023 levels, yet spot prices for battery-grade lithium carbonate collapsed 65% from their 2022 peak to $12,400 per tonne by Q4 2025 (S&P Global Commodity Insights, 2026). That price volatility, spanning a 400% swing in under three years, exposed the structural fragility of critical mineral supply chains that underpin the global energy transition. The UK government's Critical Minerals Strategy refresh, published in January 2026, identified 18 minerals essential to decarbonisation and defence, with lithium, cobalt, and rare earth elements topping the risk register (UK Department for Business and Trade, 2026). For sustainability leads navigating procurement decisions and supply chain resilience planning, understanding which segments of the critical minerals landscape are maturing, which remain stuck, and where the next inflection points will emerge is no longer optional.

Why It Matters

Critical minerals form the physical foundation of every major clean energy technology. A single offshore wind turbine requires approximately 2 tonnes of rare earth permanent magnets containing neodymium, praseodymium, and dysprosium. Each electric vehicle battery pack contains 8 to 12 kg of lithium, 5 to 20 kg of cobalt (depending on chemistry), and 30 to 60 kg of nickel. The International Energy Agency projects that demand for lithium will grow 4.5 times by 2030 relative to 2022 levels, cobalt demand will double, and rare earth demand will increase 3.5 times under a net-zero pathway (IEA, 2025).

Supply concentration creates acute geopolitical risk. The Democratic Republic of Congo produces 73% of global cobalt. China refines 65% of the world's lithium, 73% of its cobalt, and 90% of its rare earth elements. Australia and Chile account for 75% of lithium mine production. This concentration means that trade policy shifts, export controls, or operational disruptions in a small number of jurisdictions can cascade across the entire clean energy manufacturing ecosystem. China's export restrictions on gallium, germanium, and graphite implemented in 2023 and 2024 demonstrated how quickly supply disruptions translate into procurement crises for downstream manufacturers.

UK-based manufacturers and procurement teams face particular exposure. The UK imports 100% of its lithium, cobalt, and rare earths, with no domestic mining or significant refining capacity. The Faraday Institution estimates that the UK battery sector alone will require 30,000 tonnes of lithium, 10,000 tonnes of cobalt, and 5,000 tonnes of nickel annually by 2030 to supply planned gigafactory capacity (Faraday Institution, 2025). Without diversified and resilient supply chains, the UK's industrial strategy for electric vehicles, offshore wind, and defence electronics remains vulnerable to supply shocks.

Key Concepts

Direct lithium extraction (DLE) is a set of technologies that selectively extract lithium from brine sources without the need for traditional evaporation ponds. DLE processes use ion-exchange resins, membrane filtration, or solvent extraction to recover lithium in hours rather than the 12 to 18 months required by conventional evaporation. Recovery rates typically reach 80 to 95% compared to 40 to 60% for evaporation ponds, and DLE significantly reduces water consumption and land footprint. The technology is approaching commercial scale, with pilot plants operating in Argentina, the United States, and the UK.

Artisanal and small-scale mining (ASM) refers to mining operations using manual or semi-mechanised methods, typically with minimal capital investment and regulatory oversight. In the DRC, an estimated 15 to 30% of cobalt production comes from ASM operations, where working conditions, child labour risks, and environmental impacts remain persistent concerns. Responsible sourcing frameworks such as the Responsible Minerals Initiative and the Cobalt Institute's Cobalt Industry Responsible Assessment Framework (CIRAF) have been developed to improve traceability and due diligence in ASM-linked supply chains.

Midstream refining and processing encompasses the chemical and metallurgical steps that convert mined ore or concentrate into battery-grade or magnet-grade materials. This stage represents the most concentrated chokepoint in critical mineral supply chains: China processes 35% of global nickel, 58% of lithium, 73% of cobalt, and 90% of rare earths at the refining stage. Building new refining capacity outside China requires $500 million to $2 billion per facility, 5 to 8 year permitting and construction timelines, and access to skilled chemical engineering workforces.

Urban mining and recycling refers to the recovery of critical minerals from end-of-life products, manufacturing scrap, and waste streams. Current recycling rates for lithium-ion batteries remain below 5% globally, but the EU Battery Regulation mandates minimum recycled content thresholds of 12% cobalt, 4% lithium, and 4% nickel by 2030, rising to 20% cobalt, 10% lithium, and 12% nickel by 2035. These mandates are creating a new demand signal for hydrometallurgical and pyrometallurgical recycling infrastructure.

What's Working

Lithium Supply Diversification

New lithium projects outside traditional producing regions are reaching production. Argentina's Salta and Jujuy provinces now host 6 operational lithium brine projects and 14 in advanced development, collectively targeting 200,000 tonnes LCE of annual capacity by 2028 (Benchmark Mineral Intelligence, 2026). Cornish Lithium in the UK completed its DLE pilot in Cornwall, demonstrating commercially viable lithium concentrations from geothermal brines, with plans to produce 5,000 tonnes LCE annually by 2028. The European Commission's Critical Raw Materials Act, which entered force in 2024, established binding targets: by 2030, at least 10% of the EU's annual consumption of strategic raw materials must be mined domestically, 40% processed domestically, and 25% recycled from domestic waste streams. These targets have catalysed investment in lithium projects across Portugal, Finland, Germany, and the Czech Republic.

The UK government's investment of £30 million through the Automotive Transformation Fund to support domestic lithium processing capacity, alongside Tees Valley Lithium's plan to build a lithium hydroxide refinery in Teesside with 24,000 tonnes per year capacity, signals meaningful progress toward reducing import dependence. Albemarle, the world's largest lithium producer, has diversified its production base across Australia, Chile, and the United States, providing procurement teams with multiple sourcing options and reducing single-country risk.

Cobalt Traceability and Responsible Sourcing

Blockchain-based traceability systems have moved from pilot to commercial deployment across major cobalt supply chains. Re|Source, a joint venture between Glencore, Umicore, and Volvo, uses distributed ledger technology to track cobalt from mine to battery, covering 40% of Glencore's cobalt production by mid-2025. The system records chain-of-custody data at each processing node, enabling downstream buyers to verify that cobalt has not passed through uncertified ASM operations.

The Responsible Minerals Initiative now counts over 450 member companies, with its Responsible Minerals Assurance Process (RMAP) auditing smelters and refiners handling cobalt, tin, tantalum, tungsten, and mica. As of 2025, 85% of global cobalt refining capacity operates under RMAP-conformant or equivalent audit protocols (RMI, 2025). BMW's procurement team requires all battery cell suppliers to source cobalt exclusively from RMAP-conformant refiners and conducts annual supply chain audits extending to the mine level.

Battery Recycling Infrastructure Scaling

Li-Cycle, headquartered in Toronto, operates 6 spoke-and-hub recycling facilities across North America and Europe, processing 65,000 tonnes of lithium-ion battery feed per year and recovering 95% of lithium, cobalt, nickel, and manganese content through its hydrometallurgical process. Redwood Materials, founded by former Tesla CTO JB Straubel, has scaled its Nevada facility to process 60 GWh equivalent of battery materials annually, producing recycled cathode active material that re-enters the battery manufacturing supply chain directly. In the UK, Altilium Metals is constructing a hydrometallurgical recycling plant in Plymouth targeting 10,000 tonnes per year of black mass processing capacity, with output intended for the domestic battery manufacturing sector.

What's Not Working

Rare Earth Diversification Stalled

Despite significant policy attention, rare earth supply diversification has produced limited results. MP Materials operates the only active rare earth mine in the Western Hemisphere at Mountain Pass, California, but still ships the majority of its concentrate to China for separation and refining. Lynas Rare Earths, the largest non-Chinese rare earth producer, processes material at its Malaysian refinery but faces recurring regulatory and community opposition that constrains expansion. The UK has no operational rare earth mining or processing capacity, and announced projects such as Pensana's planned separation facility in Saltend have faced repeated financing delays. The gap between policy ambition and production reality remains wide: the EU's Critical Raw Materials Act targets 10% domestic extraction by 2030, but current European rare earth production sits below 1% of consumption.

Permitting Timelines and Community Opposition

New mining projects in democratic jurisdictions face permitting timelines of 7 to 15 years from initial exploration to first production, compared to 2 to 4 years in jurisdictions with less rigorous environmental and social governance frameworks. Serbia's government revoked Rio Tinto's Jadar lithium project permits in 2022 following widespread public protests, though the decision was reversed in 2024, the multi-year disruption demonstrates how community opposition can delay supply. In the UK, planning consent for mineral extraction projects faces significant local opposition, with recent surveys showing that 58% of residents near proposed lithium or tin mining sites oppose development, primarily due to concerns about water quality, landscape impact, and heavy vehicle traffic (British Geological Survey, 2025).

Price Volatility Undermining Investment

The lithium price crash from $80,000 per tonne in late 2022 to $12,400 per tonne in Q4 2025 forced project deferrals and cancellations totalling an estimated 600,000 tonnes LCE of planned annual capacity globally. Junior mining companies listed on the London Stock Exchange saw average share price declines of 70% over the same period. This volatility creates a paradox: long-term demand fundamentals support massive supply expansion, but short-term price signals discourage the capital investment required to build that supply. Offtake agreements with floor pricing mechanisms offer partial protection, but many smaller developers cannot secure such terms without significant project de-risking.

Key Players

Established Companies

• Albemarle: the world's largest lithium producer, operating brine and hard-rock lithium assets across Chile, Australia, and the United States with a combined production capacity exceeding 200,000 tonnes LCE per year
• Glencore: the leading cobalt producer globally, with operations in the DRC and recycling operations in Canada and Norway, and co-founder of the Re|Source blockchain traceability platform
• Lynas Rare Earths: the largest non-Chinese rare earth producer, operating the Mt Weld mine in Western Australia and separation facilities in Malaysia and under construction in Kalgoorlie
• CMOC Group: the second-largest cobalt producer globally through its Tenke Fungurume and Kisanfu mines in the DRC, supplying major battery manufacturers in China

Startups

• Cornish Lithium: a UK-based company developing direct lithium extraction from geothermal brines in Cornwall, targeting 5,000 tonnes LCE annual production by 2028
• Altilium Metals: a UK startup building hydrometallurgical battery recycling capacity in Plymouth, focused on recovering critical minerals from end-of-life EV batteries
• Lilac Solutions: a US-based DLE technology developer using ion-exchange beads to extract lithium from brine with >90% recovery rates, with pilot deployments in Argentina and North America

Investors

• UK Infrastructure Bank: allocated £500 million for critical minerals processing and recycling projects in the UK through 2028
• European Investment Bank: deployed €2.3 billion in critical minerals supply chain projects across Europe since 2024
• Breakthrough Energy Ventures: invested in battery recycling and DLE technology companies including Lilac Solutions and Redwood Materials

KPI Benchmarks by Use Case

Metric	Lithium (Hard Rock)	Lithium (Brine/DLE)	Cobalt (Industrial)	Rare Earths
Production cost ($/tonne)	$4,000-8,000	$3,500-6,500	$25,000-40,000	$15,000-35,000
Project development timeline	5-10 years	3-7 years	5-12 years	7-15 years
Recovery rate	70-85%	80-95% (DLE)	85-95%	60-85%
Recycling recovery rate	90-95%	N/A	95-98%	30-50%
Supply concentration (top 3 countries)	90%	85%	80%	95%
Carbon intensity (t CO2/t product)	5-15	2-8	8-20	15-40
Water intensity (m3/t product)	50-150	10-40 (DLE)	30-80	50-200

Action Checklist

• Map tier-one and tier-two critical mineral suppliers to identify single-country and single-refinery concentration risks
• Establish minimum diversification requirements in procurement contracts, targeting no more than 60% of any critical mineral from a single country
• Evaluate offtake agreements with emerging producers outside traditional supply hubs, locking in volume commitments 3 to 5 years ahead
• Integrate recycled content targets into procurement specifications aligned with EU Battery Regulation thresholds
• Implement supplier due diligence programmes covering labour rights, environmental management, and community engagement at mine and refinery level
• Assess direct lithium extraction and alternative cathode chemistry options that reduce or eliminate cobalt and rare earth requirements
• Monitor UK and EU critical minerals policy developments for subsidies, tax incentives, and regulatory mandates affecting procurement
• Develop scenario plans for supply disruption events, including 90-day inventory buffers for high-criticality minerals

FAQ

Q: Which critical minerals face the highest supply risk for UK-based manufacturers? A: Heavy rare earth elements (dysprosium, terbium) face the highest supply risk due to near-total Chinese processing dominance (>95%) and the absence of alternative commercial-scale sources. Cobalt ranks second due to DRC production concentration and ASM-related reputational risks. Lithium supply risk is moderating as new projects in Argentina, Australia, and Europe reach production, though UK manufacturers remain fully import-dependent. Companies should prioritise diversification efforts and recycled content integration for the highest-risk minerals first.

Q: How effective are blockchain traceability systems for ensuring responsible mineral sourcing? A: Blockchain traceability systems have demonstrated strong results for chain-of-custody tracking once material enters formal processing channels. The Re|Source platform and comparable systems achieve end-to-end traceability from certified mine sites through refining and cathode production. However, these systems are only as reliable as the data entered at the point of origin. ASM supply that bypasses formal collection points remains difficult to trace. Combining blockchain tracking with on-the-ground audit programmes, satellite monitoring of mining sites, and community reporting mechanisms provides the most robust assurance. Procurement teams should require traceability documentation and retain independent audit rights in supplier contracts.

Q: When will recycled critical minerals meaningfully reduce virgin mining requirements? A: The first significant wave of end-of-life EV batteries will reach recycling facilities between 2028 and 2032, driven by the 8 to 12 year battery lifespan of early EVs sold from 2016 to 2020. By 2035, recycled material is projected to supply 10 to 15% of lithium demand and 20 to 30% of cobalt demand in Europe and North America (IEA, 2025). However, recycling alone will not eliminate the need for primary mining during the 2025 to 2040 demand growth period. The EU Battery Regulation's mandated recycled content thresholds (12% cobalt, 4% lithium by 2030) will accelerate infrastructure investment but represent modest shares relative to total demand.

Q: What alternative technologies could reduce critical mineral dependency? A: Sodium-ion batteries eliminate lithium and cobalt entirely and are entering commercial production for stationary storage and low-range EV applications, with CATL and BYD shipping commercial sodium-ion cells since 2024. Ferrite magnets and switched reluctance motors avoid rare earth dependency for certain electric motor applications, though at a 10 to 20% efficiency penalty. LFP (lithium iron phosphate) battery chemistry eliminates cobalt and nickel, and LFP now accounts for over 40% of global EV battery production by capacity. Procurement teams should evaluate whether performance requirements allow adoption of these alternative chemistries to reduce exposure to the highest-risk minerals.

Sources

• S&P Global Commodity Insights. (2026). Lithium Market Outlook: Supply, Demand, and Price Forecasting Through 2030. London: S&P Global.
• UK Department for Business and Trade. (2026). UK Critical Minerals Strategy: 2026 Refresh. London: HMSO.
• International Energy Agency. (2025). Critical Minerals Market Review 2025. Paris: IEA.
• Benchmark Mineral Intelligence. (2026). Lithium Forecast Q1 2026: Supply Pipeline and Production Tracking. London: Benchmark.
• Responsible Minerals Initiative. (2025). Annual Progress Report: Responsible Minerals Assurance Process. Alexandria, VA: RMI.
• Faraday Institution. (2025). UK Battery Manufacturing: Critical Mineral Requirements and Supply Chain Analysis. Didcot: Faraday Institution.
• British Geological Survey. (2025). UK Mineral Statistics and Community Attitudes Survey. Nottingham: BGS.