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

Jamel Saadaoui (), Russell Smyth (), Joaquin Vespignani () and Yitian Wang ()
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Jamel Saadaoui: University Paris 8, IEE, LED, Saint-Denis, Franc, https://www.jamelsaadaoui.com/
Russell Smyth: Department of Economics, Monash University, Clayton, Australia, https://research.monash.edu/en/persons/russell-smyth
Joaquin Vespignani: Tasmanian School of Business & Economics, University of Tasmania, https://discover.utas.edu.au/Joaquin.Vespignani
Yitian Wang: Department of Economics, Monash University, Clayton, Australia, https://research.monash.edu/en/organisations/department-of-economics

No 2025-07, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

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.

Keywords: Geopolitics; Critical Minerals; Macroeconomics; economics; geopolitical risk; friend-shoring (search for similar items in EconPapers)
JEL-codes: F51 Q34 Q37 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2025
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Published by the University of Tasmania. Discussion paper 2025-07

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