“Mineral Security” Policy for Electric Vehicle Battery Minerals

This paper discusses the nature of quantity and price risks from the exercise of market power over critical minerals, with an emphasis on the minerals used for electric vehicle (EV) batteries. The focus is especially on risks involving China since that country holds large shares in the processing and extraction of several battery minerals. Quantity risk is the threat of selective interruptions in the supply of critical minerals available to target countries. Price risk is the threat of higher prices by restricting supplies to the market as a whole, thereby extracting economic rents from buyers. Key findings include that (i) China is unlikely to be able to control market allocations of battery minerals to implement selective supply cuts, (ii) China tends to overbuild mineral processing capacity to safeguard domestic supply chains, and that (iii) China has engaged in export price discrimination for certain critical minerals, but care is needed in comparing this risk to the risk involved with massive investment in non-Chinese mineral processing capacity.JEL numbers: Q37, Q34, F52Key words: critical minerals. electric vehicle batteries. market power. industrial policy.