Substitution and Thrifting in Critical Mineral Markets

When the price of a critical mineral rises sharply or its supply becomes uncertain, downstream industries do not simply absorb the impact passively. Manufacturers, engineers, and material scientists respond by seeking alternatives: substituting one material for another in their products, reducing the amount of a costly material used per unit of output (thrifting), or redesigning products to eliminate the material entirely. These responses are among the most powerful self-correcting mechanisms in commodity markets, but they operate on different timescales and with varying degrees of effectiveness depending on the material, the application, and the available alternatives.

Material Substitution

Substitution involves replacing one material with another that can perform the same or a similar function at lower cost or with better supply security. The feasibility of substitution varies enormously across critical minerals. Some materials, like cobalt in lithium-ion battery cathodes, have seen dramatic substitution over the past decade. Battery chemistries have evolved from high-cobalt formulations (LCO with roughly 60% cobalt in the cathode) to low-cobalt NMC 811 (about 5% cobalt) and cobalt-free lithium iron phosphate (LFP) batteries. This shift was driven by a combination of high cobalt prices, ethical sourcing concerns related to artisanal mining in the Democratic Republic of Congo, and technological advances that demonstrated LFP's viability for many EV applications.

For other materials, substitution is far more difficult. Rare earth permanent magnets based on neodymium-iron-boron (NdFeB) have no commercially viable substitute that matches their magnetic performance in the compact sizes required for EV motors and wind turbine generators. While ferrite magnets can substitute in some low-performance applications, they are significantly weaker, requiring larger and heavier motor designs. Similarly, gallium arsenide semiconductors have unique properties for certain high-frequency and optoelectronic applications that silicon-based alternatives cannot fully replicate. The substitutability of a mineral is therefore a key factor in criticality assessments.

Thrifting: Using Less Material Per Unit

Thrifting refers to the reduction in the quantity of a specific material used per unit of final product, without switching to a different material. This can be achieved through engineering improvements, manufacturing process optimization, or product design changes. In the battery sector, thrifting has been a continuous trend: the lithium content per kilowatt-hour of battery capacity has declined as manufacturers improve electrode design, optimize electrolyte formulations, and reduce manufacturing waste. Nickel loading in NMC cathodes has been optimized to achieve higher energy density with less overall cathode mass per unit of stored energy.

Thrifting also occurs in non-battery applications. The amount of platinum and palladium used in automotive catalytic converters has been reduced through improved washcoat formulations and catalyst design. Indium usage in LCD displays has been trimmed through thinner indium tin oxide coatings and improved deposition techniques. These incremental improvements may seem modest individually, but their cumulative impact on demand over a decade can be substantial, particularly when multiplied across millions of units of production.

Price Signals as Drivers of Innovation

The relationship between price and substitution or thrifting is not instantaneous. When cobalt prices spiked above $90,000 per tonne in 2018, the battery industry had already been working on lower-cobalt chemistries for years, but the price spike accelerated commercial adoption of NMC 811 and LFP. Similarly, the lithium price surge of 2021-2022, when lithium carbonate exceeded $80,000 per tonne, spurred sodium-ion battery development and renewed interest in lithium thrifting strategies across the supply chain. However, these technology shifts typically require years of research, testing, and qualification before they translate into meaningful changes in mineral demand.

This lag between price signal and demand response creates important dynamics for supply-demand modeling. Short-term demand for a critical mineral may be relatively price-inelastic because manufacturers cannot quickly change their product designs or chemistries. Over the medium term (three to seven years), substitution and thrifting can significantly alter demand trajectories. Over the long term, sustained high prices or supply insecurity can fundamentally transform the technology landscape, as the shift from cobalt-heavy to cobalt-free battery chemistries demonstrates.

Supply Security as a Substitution Driver

Price is not the only driver of substitution and thrifting. Supply security concerns, particularly those related to geographic concentration and geopolitical risk, can motivate material switching even when the alternative is more expensive. China's dominant position in rare earth processing has prompted research into rare-earth-free motor designs and alternative magnet technologies, even though NdFeB magnets remain superior on a performance-per-cost basis. China's 2023 export controls on gallium and germanium accelerated research into alternative semiconductor materials and manufacturing processes, despite the technical challenges involved.

Government policy can also catalyze substitution through regulation and research funding. The European Commission's Critical Raw Materials Act encourages substitution research as a pillar of its strategy to reduce import dependencies. The U.S. Department of Energy funds the Critical Materials Innovation Hub, which focuses specifically on developing substitutes and reducing the use of critical minerals in clean energy technologies. Japan's long-standing national programs to develop alternatives to Chinese-controlled rare earths, launched in response to the 2010 rare earth export crisis, led to meaningful reductions in dysprosium usage in permanent magnets and the development of dysprosium-free magnet grades.

Limits to Substitution and Thrifting

While substitution and thrifting are powerful market mechanisms, they have important limitations. Some substitutions involve trade-offs in performance, reliability, or cost that make them suitable only for specific applications. Sodium-ion batteries, for example, offer a lithium-free alternative for stationary storage but currently lack the energy density required for long-range electric vehicles. Thrifting has physical limits: below a certain loading, a material cannot perform its intended function. There is a minimum amount of lithium required for a lithium-ion battery to function, a minimum thickness of indium tin oxide for a transparent conductor, and a minimum rare earth content for a permanent magnet to achieve a given magnetic flux.

Furthermore, substitution in one material can increase demand for another critical mineral, merely shifting rather than eliminating the supply risk. The shift from NMC to LFP batteries reduces cobalt and nickel demand but increases demand for high-purity iron phosphate and does not reduce lithium demand. Replacing rare earth permanent magnets with electromagnets in some motor designs increases copper demand. Effective critical mineral strategy must therefore consider the full system of material dependencies rather than addressing each mineral in isolation. For a broader perspective on how these dynamics feed into market analysis, see Supply-Demand Models and Substitutability as a Criticality Factor.