Market Manipulation and Transparency in Critical Mineral Markets

Critical mineral markets are among the least transparent commodity markets in the world. Small trading volumes, concentrated supply structures, limited exchange liquidity, and the dominance of bilateral negotiations create an environment where price manipulation, information asymmetry, and market abuse can flourish with relatively limited oversight. As these materials become increasingly important to the energy transition, defense, and technology sectors, the integrity of their markets has become a matter of strategic concern for governments, manufacturers, and investors. Understanding the transparency challenges and manipulation risks in critical mineral markets is essential for market participants and policymakers seeking to build resilient and fair supply chains.

Structural Vulnerability to Manipulation

Several structural features make critical mineral markets particularly susceptible to manipulation. First, many materials are produced by a small number of companies or concentrated in a single country, giving dominant producers the ability to influence prices through production decisions, export restrictions, or strategic stockpile management. China's control over rare earth processing, for example, means that Beijing can effectively set global prices by adjusting export quotas, production allocations, or environmental enforcement at domestic facilities. When China tightened rare earth exports in 2010, prices for some rare earth oxides increased by more than 1,000% within months, demonstrating the market power that concentrated supply confers.

Second, the small absolute size of many critical mineral markets makes them vulnerable to manipulation by individual actors. The entire global market for gallium, for instance, is valued at only a few hundred million dollars annually, meaning that a moderately well-capitalized entity could acquire a significant share of available supply and exercise disproportionate market influence. Similar dynamics apply to germanium, indium, tellurium, and several rare earth elements. In these thin markets, a single large purchase or sale can move prices substantially, and the distinction between legitimate commercial activity and manipulative behavior can be difficult to draw.

Price Manipulation in Opaque Markets

The absence of exchange-traded pricing for most critical minerals means that price reporting agencies play an outsized role in price discovery. While PRAs apply rigorous methodologies and are subject to regulatory oversight, their assessments are only as good as the data they receive. In concentrated markets with few active traders, a single participant's decision to report inflated or depressed prices to a PRA can shift the published assessment, which then affects the settlement prices in supply contracts worth many times the value of the underlying assessment transactions.

This vulnerability is not theoretical. The metals trading industry has experienced several high-profile manipulation episodes. In 2022, a massive nickel short squeeze on the LME forced the exchange to suspend trading and cancel billions of dollars in transactions, raising fundamental questions about exchange governance and the vulnerability of even established metals markets to manipulation. In the cobalt market, concerns have been raised about the concentration of physical supply in the hands of a small number of trading houses and their potential ability to influence PRA assessments through selective reporting. Minor metal markets, where daily trading volumes may involve only a handful of transactions, are even more susceptible to manipulation by informed insiders.

Information Asymmetry and Insider Advantage

Information asymmetry is a defining feature of critical mineral markets. Participants with direct access to production data, government policy signals, or Chinese domestic market intelligence enjoy significant advantages over those who must rely on publicly available information. In the rare earth market, for example, Chinese domestic prices and inventory levels are not systematically published in English-language sources, creating an information gap between Chinese market insiders and international participants. Traders with offices in China and relationships with Chinese producers can access pricing and supply intelligence that is unavailable to competitors relying on PRA assessments alone.

The opacity extends to inventory data. Unlike major commodity markets where exchange warehouse stocks provide a measure of visible inventory, most critical minerals have no publicly reported inventory statistics. Market participants cannot independently verify claims about the tightness or looseness of supply, making them dependent on self-reported data from producers and traders who may have commercial incentives to misrepresent market conditions. This information asymmetry favors incumbents and insiders while disadvantaging new market entrants, smaller consumers, and the developing nations that produce but do not process many critical minerals.

State-Level Market Influence

The strategic importance of critical minerals has elevated market manipulation from a commercial issue to a geopolitical one. Governments can influence critical mineral markets through export controls, production quotas, environmental regulations, stockpile purchases and releases, subsidies, and strategic investment in processing capacity. While such actions are typically framed as legitimate policy measures, they can have the same market-distorting effects as private manipulation. China's imposition of export controls on gallium and germanium in 2023, for example, was presented as a regulatory measure but effectively served as a demonstration of market power aimed at Western nations pursuing technology restrictions against China.

Indonesia's progressive ban on nickel ore exports, designed to force domestic processing investment, is another example of state action that fundamentally alters market dynamics. By restricting raw material exports, Indonesia has captured a larger share of the nickel value chain but has also introduced uncertainty for international buyers, distorted global trade flows, and created opportunities for regulatory arbitrage. The line between legitimate resource policy and market manipulation is often blurry, and international trade rules provide limited remedies for the affected parties.

Regulatory Gaps and Reform Efforts

The regulatory framework for critical mineral markets is fragmented and, in many cases, inadequate. Major commodity exchanges are regulated by financial market authorities (such as the FCA in the UK or the CFTC in the United States), and PRAs operating in Europe are subject to the EU Benchmarks Regulation. However, the vast majority of critical mineral transactions occur outside exchange oversight, in bilateral negotiations and over-the-counter markets where regulatory coverage is minimal. There is no global regulatory body with jurisdiction over critical mineral trading, and national regulators often lack the resources and expertise to monitor these niche markets effectively.

Reform efforts are underway on multiple fronts. The G7 has called for improved transparency in critical mineral markets as part of its supply chain resilience agenda. The OECD is developing due diligence guidance for responsible mineral supply chains. Industry associations, such as the London Metal Exchange's committees and the International Council on Mining and Metals, are working to improve data sharing and price discovery. Some analysts have proposed the creation of an international critical minerals agency, analogous to the International Energy Agency for oil, that would collect and publish supply, demand, inventory, and price data to reduce information asymmetry and improve market integrity.

Implications for Market Participants

The transparency and manipulation challenges in critical mineral markets have practical implications for all participants. Buyers should diversify their price references across multiple PRAs and sources rather than relying on a single benchmark. Producers should engage with the assessment process to ensure that published prices reflect actual market conditions. Investors should be aware that price signals in critical mineral markets may not always reflect genuine supply-demand fundamentals and should incorporate manipulation risk into their analysis. Policymakers should prioritize investment in market data infrastructure, support regulatory harmonization across jurisdictions, and consider the market integrity implications of their own resource policy decisions. For more on the data challenges involved, see Trade Flows and Customs Codes.