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

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

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: geopolitical risk; critical minerals; friend-shoring (search for similar items in EconPapers)
JEL-codes: F51 Q34 Q37 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2025-12
New Economics Papers: this item is included in nep-min
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https://crawford.anu.edu.au/sites/default/files/20 ... _Vespignani_Wang.pdf

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Working Paper: Critical Minerals in an Age of Geopolitical Rivalry: Stockpiling, Refining Constraints, and the Limits of Friend-Shoring (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2025-72

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