Friendshoring and Mineral Partnerships

Friendshoring, the deliberate strategy of shifting supply chains toward allied and trusted partner nations, has emerged as a central pillar of Western critical minerals policy. Recognizing that China's dominance over mineral processing cannot be broken through domestic production alone, the United States, the European Union, Australia, Canada, Japan, South Korea, and the United Kingdom are building a network of bilateral and multilateral partnerships designed to create diversified, resilient supply chains among geopolitically aligned countries. These partnerships span the full value chain, from mining investment and processing capacity to research collaboration and strategic stockpiling.

The Minerals Security Partnership (MSP)

The Minerals Security Partnership was launched in June 2022 by the United States and an initial group of partner countries including Australia, Canada, Finland, France, Germany, Japan, South Korea, Sweden, the United Kingdom, the European Commission, Italy, and India. The partnership's stated objective is to catalyze public and private investment in responsible critical mineral supply chains that adhere to high environmental, social, and governance (ESG) standards.

The MSP is not a formal treaty or binding agreement but rather a coordination platform. Partner governments identify promising mining and processing projects in member and third-party countries, then work to mobilize financing from development finance institutions, export credit agencies, and private investors. The partnership has convened around specific projects, including a lithium processing facility in India, cobalt and copper projects in Zambia, a rare earth processing plant in Estonia, and nickel laterite projects in Brazil and the Philippines.

By mid-2024, the MSP had expanded to include additional partners and had facilitated investment discussions for over two dozen projects across four continents. However, critics note that the MSP lacks dedicated funding, enforcement mechanisms, or binding commitments from member governments. Its effectiveness depends on whether partner nations translate political declarations into sustained financial support and whether the projects it champions can compete with the speed and scale of Chinese investment in the same jurisdictions.

U.S.-Led Bilateral Mineral Agreements

The United States has pursued a series of bilateral critical minerals agreements (CMAs) that serve both strategic and economic objectives. A key driver has been the Inflation Reduction Act (IRA) of 2022, which conditions electric vehicle tax credits on the sourcing of battery minerals from the United States or countries with which it has a free trade agreement (FTA) or a critical minerals agreement. This provision created a powerful incentive for nations to negotiate CMAs with Washington, as minerals sourced from CMA partner countries would qualify for IRA benefits.

The first CMA was signed with Japan in March 2023, followed by agreements with the European Union, the United Kingdom, Australia, and negotiations with several other countries. These agreements typically cover trade facilitation for critical minerals, cooperation on supply chain transparency, joint research and development, and mutual recognition of environmental and labor standards. The Japan CMA, for example, commits both countries to avoid export restrictions on critical minerals and to cooperate on supply chain diversification.

The IRA's sourcing requirements have been controversial. The phase-in schedule requires an increasing percentage of battery mineral value to come from the United States or FTA/CMA partners, reaching 80% for critical minerals by 2027. Meeting these thresholds requires rapid buildout of mining and processing capacity in allied nations, a timeline that many industry observers consider extremely ambitious given the lengthy permitting and construction cycles for mineral projects.

The EU Critical Raw Materials Act

The European Union's Critical Raw Materials Act, which entered into force in May 2024, establishes ambitious targets for reducing import dependency: by 2030, at least 10% of the EU's annual consumption of strategic raw materials should come from domestic extraction, at least 40% from domestic processing, and at least 25% from recycling. To complement these domestic targets, the Act creates a framework for Strategic Partnerships with resource-rich countries.

The EU has signed or is negotiating strategic raw material partnerships with several nations, including Australia, Canada, Chile, the DRC, Kazakhstan, Namibia, Argentina, Ukraine, and Norway. These partnerships aim to secure supply commitments, promote investment in mining and processing in partner countries, and support technology transfer and capacity building. The EU's approach emphasizes sustainability requirements, linking mineral access to compliance with environmental standards and responsible mining practices, a feature that differentiates European partnerships from Chinese investment, which typically imposes fewer such conditions.

Australia-Japan-South Korea Mineral Cooperation

Australia, as the world's largest producer of lithium and a major source of rare earths, nickel, cobalt, and other critical minerals, occupies a central position in friendshoring strategies. Japan and South Korea, both heavily dependent on imported minerals for their advanced manufacturing sectors, have pursued deep bilateral cooperation with Australia. Japan's Organisation for Metals and Energy Security (JOGMEC) has invested in Australian mining projects and signed long-term offtake agreements for rare earth concentrates from Lynas and lithium from various Western Australian producers.

South Korea's state-backed Korea Mine Rehabilitation and Mineral Resources Corporation (KOMIR) and private companies such as POSCO have invested in Australian lithium and nickel projects. POSCO's lithium hydroxide plant in Gwangyang, South Korea, sources spodumene concentrate from Australian mines, creating a vertically integrated supply chain that bypasses Chinese processing. These bilateral relationships are reinforced by broader diplomatic frameworks, including the Quad (comprising the United States, Japan, Australia, and India) and AUKUS, which increasingly incorporate supply chain security as a component of strategic cooperation.

Canada's Critical Minerals Strategy

Canada has positioned itself as a preferred partner for critical mineral friendshoring, leveraging its abundant mineral resources, stable governance, and close trade relationships with the United States, Europe, and Japan. The Canadian Critical Minerals Strategy, published in December 2022, allocated CAD 3.8 billion in funding to support mining, processing, and recycling projects. Canada's mineral endowment includes significant deposits of lithium, cobalt, nickel, rare earths, graphite, and uranium, making it one of the few countries with the geological potential to contribute across multiple critical mineral supply chains.

Canadian partnerships with the United States are particularly deep, facilitated by the USMCA trade agreement (which qualifies Canadian minerals for IRA benefits), joint regulatory harmonization efforts, and cross-border infrastructure connections. The Joint Action Plan on Critical Minerals Collaboration between the two countries covers supply chain mapping, investment coordination, and joint research on mineral processing technologies. Several Canadian companies, including Avalon Advanced Materials, Vital Metals, and Canada Nickel, are developing projects that target both domestic and allied-nation demand.

Challenges and Limitations of Friendshoring

Despite the political momentum behind friendshoring, significant challenges remain. First, the timeline mismatch between geopolitical urgency and mining project development is severe. New mines typically take 10 to 15 years from discovery to production, and processing plants require 3 to 7 years to build, while the political need for diversified supply chains is immediate. Second, friendshoring does not eliminate resource nationalism risks. Countries that receive Western investment to develop their mineral sectors may subsequently impose export restrictions, renegotiate terms, or nationalize assets, just as they would with Chinese investment.

Third, cost competitiveness remains a fundamental obstacle. Chinese mineral processing is cheaper than alternatives in most Western countries due to lower labor costs, less stringent environmental regulation, state subsidies, and economies of scale built over decades. Allied-nation projects often require government support, including subsidies, tax credits, loan guarantees, and offtake agreements, to be financially viable, raising questions about long-term sustainability without ongoing public funding.

Fourth, the geopolitical fragmentation of supply chains carries its own risks. If friendshoring leads to a bifurcated mineral market, with one set of supply chains serving Western economies and another serving China and its partners, the result could be higher costs, reduced efficiency, and increased vulnerability to localized disruptions within each bloc. The optimal outcome for global supply security would involve diversified, transparent, and interconnected supply chains rather than parallel, isolated ones, but achieving this in an era of intensifying great power competition remains a formidable challenge.