Supply Risk: The Foundation of Mineral Criticality

Supply risk is the single most important dimension in virtually every criticality framework. It captures the probability that access to a mineral will be disrupted, whether through geological scarcity, geopolitical conflict, trade policy actions, infrastructure failures, or market manipulation. When a mineral's supply risk is high, even modest demand can create vulnerability for the industries that depend on it.

Understanding supply risk requires analyzing multiple interconnected factors. A mineral mined in 50 countries with well-developed infrastructure and stable governance carries minimal supply risk. A mineral produced predominantly in one or two nations, particularly those with a history of export controls, political upheaval, or adversarial relationships with major consuming nations, carries supply risk that can be severe enough to warrant emergency stockpiling and accelerated development of alternative sources.

Geographic Concentration of Production

The most commonly cited supply risk factor is the concentration of global production in a small number of countries. This is typically measured using the Herfindahl-Hirschman Index (HHI), which sums the squared market shares of all producing countries to generate a score between 0 (perfectly distributed) and 10,000 (single-country monopoly). An HHI above 2,500 is generally considered highly concentrated.

Some of the most concentrated mineral supply chains include:

• Rare earths: China accounted for roughly 60-70% of global mine production in recent years, with Myanmar emerging as the second-largest producer at around 12%. The HHI for rare earth mining exceeds 4,000.
• Cobalt: The Democratic Republic of Congo produces over 70% of mined cobalt. The mining HHI exceeds 5,000, making it one of the most concentrated mineral supply chains on Earth.
• Platinum group metals: South Africa controls approximately 70% of global platinum production and an even larger share of rhodium and iridium. Russia contributes around 10-12% of palladium.
• Gallium: China produces over 95% of the world's primary gallium, yielding an HHI above 9,000, essentially a monopoly position.
• Natural graphite: China produces approximately 65% of natural graphite, with the processing of battery-grade spherical graphite even more concentrated.

Political and Governance Risk

Geographic concentration alone does not determine supply risk. Concentration in politically stable, trade-friendly nations carries less risk than concentration in countries with weak governance, corruption, conflict, or authoritarian decision-making. Criticality frameworks typically overlay production concentration data with governance indicators such as the World Bank's Worldwide Governance Indicators (WGI), which measure political stability, rule of law, regulatory quality, control of corruption, voice and accountability, and government effectiveness.

Cobalt illustrates this dynamic clearly. The DRC's dominant position in cobalt mining is compounded by governance challenges, including artisanal mining under unsafe conditions, child labor concerns, political instability, and infrastructure deficiencies. These factors elevate cobalt's supply risk well beyond what concentration alone would suggest.

Trade Restrictions and Export Controls

Government-imposed trade barriers represent a distinct and increasingly prominent component of supply risk. Export quotas, licensing requirements, tariffs, and outright bans can restrict mineral flows regardless of production capacity. China's 2010 restrictions on rare earth exports to Japan during a diplomatic dispute and its 2023 export controls on gallium and germanium are landmark examples that demonstrated how mineral supply can be weaponized for geopolitical purposes.

Indonesia's progressive ban on nickel ore exports, designed to force downstream processing investment within its borders, is another form of trade restriction that has reshaped global nickel supply chains. Nations assessing supply risk now routinely monitor trade policy developments in producing countries and incorporate regulatory risk into their scoring models.

Infrastructure and Logistics Vulnerability

Even when political and trade conditions are favorable, supply risk can arise from infrastructure constraints. Minerals produced in remote, landlocked, or poorly connected regions face higher transportation costs and disruption risk. A single road closure, port congestion event, or rail failure can delay shipments for weeks. Climate events, including floods, droughts affecting hydroelectric power for mining operations, and extreme heat disrupting rail lines, are increasingly recognized as infrastructure risk factors.

Measuring and Mitigating Supply Risk

Governments and companies mitigate supply risk through several strategies. Diversification of supply sources, including investment in new mining projects across multiple jurisdictions, is the most fundamental approach. Strategic stockpiling, practiced by Japan, South Korea, the United States, and the European Union, provides a buffer against short-term disruptions. Long-term offtake agreements with producers in stable jurisdictions lock in supply commitments. Investment in recycling and secondary supply reduces dependence on primary production. And development of substitute materials can eliminate supply risk for specific applications entirely.

Supply risk assessment is not a one-time exercise. The geopolitical landscape, trade policy environment, and production geography shift continuously, requiring regular reassessment and adaptive strategy. For any mineral, a high supply risk score today does not guarantee the same score five years from now, and conversely, a mineral considered low-risk can become critical almost overnight if political conditions change.