Critical minerals in Southeast Asia and India

4. Geopolitical and trade risks in critical mineral markets

4.1. A changing strategic landscape

Critical mineral markets are no longer shaped solely by geology, technology or price signals – they are increasingly driven by geopolitical competition, trade policies and strategic industrial planning. As discussed in previous sections, the highly fragmented and geographically concentrated nature of supply chains creates vulnerabilities that states are seeking to manage proactively. China’s dominant role across many segments of these supply chains, from mining to refining and manufacturing, has prompted governments worldwide to reduce dependency, diversify suppliers and secure access to key materials. This is well exemplified by the United States Inflation Reduction Act and the European Union’s Critical Raw Materials Act (see Box 5.1 below), which aim to support a diversification away from foreign towards domestic (or trading allies’) sources of CRMs (OECD, 2025[22]). Countries across South and Southeast Asia are responding to this need, by positioning themselves as alternatives and seeking to forge new partnerships. At the same time, ASEAN countries are receiving substantial downstream investment from China, underscoring both their strategic importance and the complex interdependencies shaping future supply chains.

Box 3. Examples of initiatives aiming to enhance security of CRM supplies

The EU Critical Raw Materials Act

The CRMA entered into force on 23 May 2024, establishing a legal framework for developing a secure and sustainable supply of selected raw materials – identified as key inputs for the green and digital transitions and facing high supply risks – within the EU and diversifying foreign-sourced input (European Parliament, 2024[49]). It proposes several measures, in particular to streamline permitting processes and strengthen international engagement, and to limit dependence on any single third country to no more than 65 % of annual consumption for each strategic raw material.

The US Inflation Reduction Act

Adopted in 2022, the US Inflation Reduction Act was a cornerstone of national efforts to decarbonise the power and transport sectors. It introduced a wide range of incentives, including production and investment tax credits for clean electricity and energy-storage projects, as well as purchase incentives for electric and hydrogen vehicles (OECD, 2025[22]). To qualify for these vehicle tax credits, a defined share of the battery’s critical minerals must be sourced from within North America or from a country with which the United States maintains a free-trade agreement, though provisions for clean energy funding and EV tax credits have since been widely repealed in 2025.

4.2. Geo-dynamics of critical mineral markets

A key feature of critical mineral markets is that geographic concentration is much higher in refining than in mining. For instance, copper illustrates this contrast. Mining is relatively dispersed, but refining is more concentrated – China accounts for around 45% of global refined copper output (Bloomberg, 2023[50]). Even so, copper is less vulnerable and concentrated than other minerals. India and Japan have footholds in the supply chain, with Japan ranking as the third-largest refiner by country of ownership and the fifth largest by location, and India expanding its refining capacity (IEA, 2024[6]). Here, the risk lies less in concentration than in whether supply will meet soaring demand.

Rare Earth Elements and graphite are far more concentrated. China produces about 92% of refined magnet REEs, despite significant mining output for REEs from Myanmar (IEA, 2024[6]). Malaysia is China’s largest competitor in this space, but still only a couple industrial-scale facilities exist for REE refinement. China also produces around 99% of spherical graphite used in EV batteries as well as most synthetic graphite (which is the other option for graphite EV components) (IEA, 2024[6]). Supply of lithium chemicals also remains rather concentrated and geopolitically exposed, particularly amid US–China competition.

The geographic concentration of refining output should be understood in relation to downstream production and consumption (Prakash, 2023[51]). For example, in 2023 China represented nearly 60% of global EV registrations (IEA, 2024[52]). Yet Southeast Asia’s EV market is growing rapidly, with several ASEAN countries outcompeting the EU in terms of EV market penetration (ADB - SEADS, 2026[53]), showing that geographic concentrations in refinement could potentially lead to market dependencies and trade imbalances across Southeast Asia and India.

There are some signs of diversification. India is among the top five natural graphite producers and has trialled spherical graphite production (USGS, 2025[3]). Southeast Asia also holds promise: Viet Nam is among the top six countries worldwide for rare earth reserves (USGS, 2025[3]), and Malaysia hosts Lynas’ refining plant, the only one of scale outside China (IEA, 2024[6]). Yet project lead times remain long – typically eight years for REEs – and Chinese supply has so far been sufficient to meet demand, delaying new investments (IEA, 2024[6]).

4.3. Export controls and trade restrictions

Export restrictions are increasingly being used as strategic tools to shape industrial outcomes and assert geopolitical leverage. China’s decision in 2023 to impose export controls on gallium and germanium, followed by restrictions on graphite and bans on REE refining technologies, illustrates how trade policy is now deployed to achieve broader strategic goals. These measures have immediate supply-side impacts: graphite exports fell sharply following the introduction of licensing requirements, while new restrictions increased policy uncertainty across downstream sectors (Home, 2023[54]) (Bloomberg, 2024[55]).

Indonesia’s nickel ore export ban, introduced in 2020 and progressively tightened, is another landmark example. Designed to spur domestic value addition and reduce reliance on raw-material exports, the ban has reshaped global supply chains by accelerating investment in smelting, refining and battery production. As discussed in Section III, more than 40 nickel-processing plants are now operating in the country, and Indonesia has become the world’s largest nickel refiner (IEA, 2024[6]). However, the measure has also had major trade and legal ramifications. The European Union challenged the ban at the WTO (DS592), arguing that it distorts global trade (WTO, 2023[56]). This ban also shaped the US reciprocal trade agreement with Indonesia in 2025, with Indonesia provisionally intending to remove export restrictions being a key element. Moreover, its environmental implications, from energy-intensive processing to increased coal use, remain controversial and are discussed in Box 4 below.

Box 4. Industrial policy vs. environmental sustainability: The case of Indonesia’s nickel export ban

Indonesia’s decision to ban exports of unprocessed nickel ores, first announced in 2009 and tightened in 2020, aimed to promote domestic value addition and industrialisation. By requiring investors to refine nickel within the country, the policy has succeeded in attracting significant FDIs, particularly from Chinese companies. As a result, Indonesia has become the world’s largest nickel producer and refiner, accounting for over half of global supply in 2023 (IEA, 2024[6]).

However, the policy has also accelerated a structural shift in global production towards nickel laterite ores, which are abundant in Indonesia but more difficult to refine than traditional sulphide ores. To accommodate Indonesia’s nickel endowment, Chinese firms have pioneered large-scale investment in laterite refining technologies, notably high-pressure acid leaching, which are energy- and emissions-intensive and also generates large volumes of toxic waste (Mandala, 2024[59]). This raises concerns about the environmental footprint of nickel supply chains, particularly given nickel’s central role in electric vehicle batteries that are meant to support decarbonisation.

The Indonesian case highlights a broader policy dilemma: export bans and resource-based industrial strategies can deepen domestic value capture but may also lock in more environmentally harmful production pathways. This experience illustrates the challenge of balancing industrial policy objectives (jobs, revenues, downstream investment) with environmental sustainability goals. Future strategies could consider accompanying industrial policies with stronger environmental safeguards, investment in cleaner refining technologies, and international co-operation to ensure that critical minerals supply chains contribute both to economic upgrading and to global decarbonisation.

The growing use, and rising severity, of export restrictions is reshaping global mineral markets in fundamental ways. These measures influence not only the availability and pricing of raw materials but also the geographical configuration of value chains, with spillover effects cascading through downstream industries (OECD, 2025[22]). When imposed by countries with large market shares, such restrictions can distort global prices and cost structures, trigger policy imitation by other exporters (retaliation), and amplify market volatility. Restrictions designed to benefit domestic downstream industries at the expense of foreign users are among the most contentious forms of state intervention, as they can undermine the viability of extractive industries and discourage new investment (OECD, 2025[22]).

4.4. Further geopolitical risks

Resource nationalism, mineral cartels, foreign investment screening, and politically motivated trade restrictions are also all increasingly common geopolitical risks shaping critical minerals. Natural disasters, pandemics, or armed conflict can disrupt supply chains, while financial actors may influence markets through speculation and price manipulation.

From a global governance perspective, WTO’s existing rules were not designed for the contemporary ecosystem. Weak dispute-settlement mechanisms further limit the WTO’s ability to address conflicts related to critical minerals. The anti-dumping laws have not proved to be adequate in this field, as the risks and disputes extend from upstream mining to processing and investments in downstream industries that utilise these critical minerals. Without updated rules, the Southeast Asia region and its partners risk fragmentation of trade flows, duplication of investments, and politicisation of resource access, all of which could slow the pace of the global energy transition (Phoumin, Nepal and Taghizadeh-Hesary, 2026[57]).

4.5. Strategic responses and the case for cooperation

To ensure the affordable availability of critical minerals and to mitigate risks related to disruptions of trade, countries in Southeast Asia and India should actively pursue multilateral cooperation in the governance of critical minerals. Evidence shows that if markets fragment along geopolitical lines, prices will rise and supply will become less responsive to shocks (Prakash, 2023[51]). This would ultimately hinder countries efforts to scale up the adoption of mineral reliant digital and clean technologies, reducing the countries innovation capacity and competitiveness.

Creating effective solutions through cooperation will require a deeper understanding of the motivations behind trade restrictive policies, understanding their effects on trading partners and the trade-offs involved in reconciling different national interests. Building cooperative frameworks – for instance, to improve transparency, coordinate stockpiling, and agree on restraint in the use of restrictions – could strengthen supply-chain resilience while maintaining incentives for sustainable production and investment. Examples of existing plurilateral and multilateral initiatives are discussed in Section VI.