Executive summary
Rare metals and critical minerals — copper, lithium, cobalt, nickel, graphite, the rare earth elements and a long tail of strategic metals — have moved from the margins of industrial policy to the centre of global economics and security. They are the physical foundation of electrification, advanced electronics, artificial-intelligence infrastructure and modern defence systems. The IEA projects lithium demand rising roughly fivefold by 2040, with graphite and nickel doubling, and cobalt and rare earths up 50–60%. Aggregate demand for key minerals is expected to climb from about 28 million tonnes in 2021 toward 41 million by 2040, requiring close to USD 2 trillion of supply-chain investment. Supply is highly concentrated — geographically in a handful of producing countries, and even more so in processing, where China refines an estimated 90% of rare earths and dominates lithium, cobalt and graphite midstream.
What are rare metals and critical minerals?
Battery metals (lithium, nickel, cobalt, graphite, manganese) feed lithium-ion cells for EVs and grid storage. Rare earth elements (17 elements including neodymium, praseodymium, dysprosium, terbium) are essential to permanent magnets for motors and turbines. Base and wiring metals — copper above all — are the metal of electrification. Technology and defence metals (gallium, germanium, antimony, tungsten, niobium, PGMs, titanium) are vital to semiconductors and weapons systems. The rare earths are not actually rare in the crust; what is scarce is the difficulty, cost and environmental burden of separating and refining them. The entire value of the sector concentrates in the midstream — where one country has built a near-monopoly.
Why they matter
Three converging forces have made these materials indispensable. The energy transition: electric vehicles use around four times more copper than combustion cars; batteries alone drove roughly 85% of recent growth in battery-metal demand. Digital and AI infrastructure: data centres, semiconductors and AI hardware depend on copper, gallium, germanium and rare-earth magnets. Defence and aerospace: a modern fighter aircraft contains one to two tonnes of rare earths and strategic metals.
Demand to 2040: structural, not cyclical
Across mainstream scenarios, demand rises steeply and durably. Indicative IEA STEPS multiples to 2040: lithium ~5×, graphite ~2×, nickel ~2×, cobalt ~1.6×, rare earths ~1.6×, copper ~1.3×. Copper grows from a vast base, making its absolute tonnage increase enormous; rare earths and cobalt grow more modestly in volume but remain strategically decisive because of magnets and batteries.
The midstream bottleneck
Mining and using a metal are separated by refining, separation and component manufacturing. This is where China built decades of advantage, supported by state investment and lighter environmental constraints — and now controls the chokepoint. Roughly 60% of critical-mineral demand is met through international trade, so when processing sits with one or two players, ordinary commercial risk becomes geopolitical risk. The most contested opportunities increasingly lie in midstream capacity outside China: separation plants, refineries, precursor and magnet manufacturing — projects where Western governments are now co-investing directly.
Africa — the resource heartland
Africa holds roughly 30% of the world's critical-mineral reserves and led global production of cobalt, copper, gold and platinum-group metals in 2024. Key positions: ~57% of global cobalt reserves on the continent; the DRC accounts for ~70% of mined cobalt and is a leading copper producer; South Africa holds ~88% of platinum reserves and produces ~28% of global manganese. Fast-emerging lithium and rare-earth jurisdictions include Namibia, Zambia and Tanzania; Madagascar and Morocco add cobalt, graphite and phosphate scale. For a consulting-led investor, the edge is structuring and partner selection — heavy Chinese incumbency in mining and financing, infrastructure deficits, governance and ESG scrutiny all need to be navigated explicitly.
The Americas — a hemisphere of opportunity
The Western Hemisphere combines one of the richest concentrations of critical minerals on earth with relative political stability and growing political will to build domestic value chains. The Lithium Triangle of Argentina, Bolivia and Chile holds roughly half of the world's known lithium resources; each country has chosen a markedly different path. Chile and Peru together account for a major share of global copper output. Brazil is an emerging rare-earth jurisdiction; the United States is rebuilding domestic capacity through projects like MP Materials at Mountain Pass, with direct government equity and defence offtake. Canada offers stable jurisdictions across nickel, cobalt, lithium and rare earths.
Geopolitics & the race for supply security
Critical minerals have become a central arena of US–China competition and a priority for the European Union. The US Inflation Reduction Act and Defense Production Act direct billions to domestic and allied projects. The EU's Critical Raw Materials Act and selected strategic projects set procurement and diversification targets; an IDB–EU initiative channels funding into Latin American value chains. Producing nations in Africa and Latin America increasingly use export bans and quotas to push processing onshore and assert economic sovereignty.
Risk framework & outlook
Rare-metals investing concentrates several risk types at once: severe price volatility and thin liquidity; jurisdictional, operational and infrastructure execution risk; technology substitution and recycling; and concentration dependence on single countries or counterparties for processing. The discipline is to map them explicitly rather than bet on a single bullish narrative. The outlook: use volatility rather than fear it — entry at the bottom of a price cycle into low-cost assets is where outsized returns are made. Diversify across battery metals, copper and rare earths, and across Africa and the Americas.
This document is provided by KBC Euro Credit Capital Limited for general information purposes only. It is not an offer, solicitation or recommendation, nor investment, legal or tax advice. Obtain independent professional advice.