What Makes a Mineral Critical?

Not every mineral that is useful qualifies as critical. Iron, aluminum, and silicon are essential to modern industry but are produced in large quantities from geographically diverse sources, making severe supply disruptions unlikely. Criticality is a more nuanced concept that reflects the intersection of a mineral's importance to an economy and the risk that its supply could be disrupted. Understanding the criteria that define criticality is fundamental to grasping why certain minerals receive extraordinary policy attention while others do not.

The Core Dimensions of Criticality

Most criticality assessment frameworks evaluate minerals along two primary axes: supply risk and economic importance (sometimes called "vulnerability to supply restriction"). A mineral that scores high on both axes is classified as critical. Some frameworks add additional dimensions, such as environmental implications, demand growth trajectories, or recycling potential, but supply risk and economic importance remain the foundational pillars.

Supply Risk

Supply risk measures the likelihood that access to a mineral could be disrupted. This encompasses several sub-factors:

• Geographic concentration of production: When a large share of global output comes from one or two countries, the supply chain is vulnerable to disruptions in those specific nations. The Herfindahl-Hirschman Index (HHI) is commonly used to quantify production concentration.
• Political and governance risks: Production concentrated in countries with weak governance, political instability, or adversarial trade relationships elevates supply risk. The World Governance Indicators (WGI) are often incorporated into assessments.
• Trade restrictions and export controls: Countries that impose export quotas, tariffs, or outright bans on mineral exports create additional supply uncertainty for importing nations.
• Infrastructure and logistics: Minerals produced in landlocked regions or areas with poor transport infrastructure face higher disruption risk from natural disasters, conflict, or capacity constraints.

Economic Importance

Economic importance captures how significant a mineral is to a nation's economy and its strategic industries. Key sub-factors include:

• Value added to downstream industries: A mineral used in industries that contribute significantly to GDP, employment, or exports carries higher economic importance.
• Breadth of applications: Minerals used across multiple sectors, such as defense, energy, electronics, and transportation, are generally rated higher.
• Revenue at risk: The potential economic loss from a supply disruption, measured by the value of industries that would be affected, determines the urgency of securing supply.

Lack of Substitutes

A mineral's criticality is amplified when there are no viable alternatives for its primary applications. Substitutability considers both technical feasibility (whether a replacement material can perform the same function) and economic viability (whether the substitute is cost-competitive). Rare earth permanent magnets, for example, have no commercially viable substitutes in high-performance electric motors and wind turbine generators, making neodymium and dysprosium exceptionally critical.

Concentration of Processing

Even when mining is geographically distributed, the processing and refining of minerals is often concentrated in a single country. China, for instance, processes the majority of the world's rare earths, lithium chemicals, cobalt sulfate, and natural graphite, regardless of where these minerals are mined. This processing bottleneck creates a separate and often more severe supply risk than mining concentration alone.

Additional Factors in Modern Assessments

As criticality frameworks have evolved, many now incorporate additional factors beyond the traditional two-axis model:

• Demand growth: Minerals facing rapidly increasing demand, particularly from clean energy technologies, are treated with greater urgency because supply may not scale quickly enough to meet projected needs. Demand growth analysis has become central to energy transition planning.
• Recycling potential: The ability to recover a mineral from end-of-life products or industrial waste can mitigate supply risk. Low recycling rates increase a mineral's long-term criticality.
• Byproduct dependency: Some minerals, such as indium, gallium, tellurium, and several rare earths, are produced primarily as byproducts of other metals. Their supply is therefore constrained by the production economics of the primary metal, making independent scaling virtually impossible.
• Environmental and social governance: The environmental footprint and social conditions associated with a mineral's extraction increasingly influence criticality assessments, particularly as ESG considerations become embedded in procurement standards.

How Different Nations Apply These Criteria

The weight assigned to each criterion varies between countries and reflects their unique circumstances. The United States, as a major importer of many minerals, places heavy emphasis on import dependency and geopolitical risk. The European Union's methodology uses a quantitative scoring system that combines supply risk (including trade, governance, and concentration metrics) with economic importance measured by value added. Australia, as a significant mineral producer, focuses more on export market concentration and the strategic value of minerals to allied nations.

Japan's approach uniquely incorporates stockpiling adequacy and the availability of strategic reserves into its criticality calculus, reflecting its historical experience with supply disruptions. Canada considers the potential for domestic production as a mitigating factor, effectively reducing the criticality score for minerals it can source within its own borders.

Why Criticality Is Dynamic

It is essential to understand that criticality is not a fixed property of a mineral. It changes over time as technologies evolve, new deposits are discovered, geopolitical relationships shift, recycling capabilities improve, and substitute materials are developed. Cobalt, for example, has seen its criticality moderated slightly by the development of lithium iron phosphate (LFP) battery chemistries that eliminate cobalt entirely. Conversely, the criticality of gallium and germanium spiked after China's 2023 export controls demonstrated the vulnerability of concentrated supply chains.

This dynamic nature is why governments conduct criticality assessments on a regular cycle, typically every two to four years, and why investors and industry planners must continuously monitor the factors that drive mineral criticality.