
By Sohom Bhowmick ,
Research Manager Political and Credit Risk
05/14/2025 · 5 minute read
Geopolitical dynamics, such as potential increase in tariffs and export restrictions, are creating potentially heightened political risks in the mineral sector. These factors can affect supply chains, prices, product availability, and return on investment for mining projects. As critical minerals remain essential for modern technologies and the energy transition, stakeholders must understand evolving geopolitical risks and implement effective solutions to help mitigate them.
Geopolitical risks in the mineral sector can be categorized in six key areas:
Critical mineral production is concentrated in several countries. For example, Australia and the Democratic Republic of Congo (DRC) are the leaders in lithium and cobalt production, respectively. This concentration heightens vulnerability to political instability and regulatory changes in these regions, potentially impacting investments.
Additionally, concentration of production can amplify the impact of political instability on prices and the availability of critical minerals. For example, political instability in the Sahel region has challenged the development of new mines and the operation of existing ones. New mining operations take time to develop and so reliance on a few suppliers is a critical risk.
China processes over 65% of global lithium and 87% of rare earth elements, giving it substantial influence over pricing and availability. China’s past and current export restrictions during diplomatic disputes have led to supply chain disruptions. Events like China’s rare earth embargo on Japan in 2010 and recent export controls on the US in 2024 demonstrate how that such disputes can create risks for other nations or companies.
Companies are having to keep up to date on the changing regulatory landscape in the critical minerals sector. While regulations aim to protect critical minerals and communities, and encourage greater transparency, they can potentially lead to operational challenges. For example, the EU Critical Raw Materials Act is designed to protect critical raw materials supply chains and reduce dependence on external suppliers.
Geopolitical risks can lead to sharp spikes in critical mineral prices, which can have broad consequences. For example, increases in the production costs and sale prices of batteries and electric vehicles could potentially slow the pace of electrification. The highly fluid nature and application of tariffs in different sectors are also causing disruption and concern.
Mining companies are aiming to balance the interests and expectations of various stakeholders, including investors, governments, regulators, customers, and communities, in relation to their ESG commitments. Building stakeholder trust and recognizing financial incentives are important for enhancing companies' reputations, operations, and investment opportunities.
Given these geopolitical and macroeconomic risks, organizations in the mineral sector should consider comprehensive risk mitigation strategies, (including insurance solutions). To this end, some considerations include:
As the mining industry evolves, it will likely continue to encounter geopolitical risks alongside opportunities for growth. The sector’s essential role in global technological advancement and sustainability efforts highlights its importance to the global economy and the need to understand and mitigate risks to be successful. By implementing robust risk mitigation solutions and strategic risk management practices, organizations can effectively navigate this complex landscape while protecting their investments.
To learn more about the impact of geopolitical risks across the mineral sector, connect with us and let's start a conversation.
This post includes general commentary, is not intended to be taken as advice regarding any individual situation and should not be relied upon as such.
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