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Critical Minerals in an Age of Geopolitical Rivalry: Stockpiling, Refining Constraints, and the Limits of Friend-Shoring

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  • Jamel Saadaoui
  • Russell Smyth
  • Joaquin Vespignani
  • Yitian Wang

Abstract

Geopolitical tensions between the United States and China pose significant risks to global critical-mineral supply chains, particularly because refining capacity for most critical minerals, including aluminium, copper, nickel, tin and zinc, is overwhelmingly concentrated in China. Using monthly data from 1995-2025 and a structural VAR-local projection framework, we estimate the dynamic effects of exogenous shocks to the US-China Political Relations Index (PRI) on mineral markets. We find that geopolitical deterioration systematically induces significant precautionary stockpiling. We then construct a multidimensional friend-shoring index incorporating reserves, alignment, regime type and distance, showing that only a narrow set of United States partners, primarily Australia and Canada, offer feasible pathways for refining diversification. The policy recommendation stemming from our findings is that the United States should make strategic stockpiling of refined critical minerals, rather than raw ores, the centerpiece of its strategy to build supply chain resilience, while negotiating long-term bilateral packages for the supply of refined critical minerals with Australia and Canada.

Suggested Citation

  • Jamel Saadaoui & Russell Smyth & Joaquin Vespignani & Yitian Wang, 2025. "Critical Minerals in an Age of Geopolitical Rivalry: Stockpiling, Refining Constraints, and the Limits of Friend-Shoring," CAMA Working Papers 2025-72, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2025-72
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    JEL classification:

    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q37 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Issues in International Trade
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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