Introduction to the Crisis
The world is facing a crisis in the supply of critical minerals, which are essential for the production of many modern technologies. Western automakers are struggling to cope with the latest round of Chinese export restrictions on rare earths, which has led to a growing sense of urgency to create a counterweight to Beijing’s dominance over global mineral supply chains.
The Chinese Strategy
At the center of the conversation is a persistent and disruptive strategy used by Chinese state-backed firms. They flood global markets with critical minerals, push prices below sustainable production levels, and wipe out foreign competition. This strategy has been highly effective, with prices for core energy transition minerals collapsing in just three years. For example, between May 2022 and May 2025, prices for cobalt fell nearly 60 percent, nickel prices plunged 73 percent, and lithium prices cratered by almost 87 percent.
The Need for Collective Action
Experts like Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies, are calling for a fundamentally different approach. She argues that nations need to coordinate their market power and engage in collective deterrence to counter China’s dominance. "If countries continue to operate independently instead of collectively, China will retain its dominant position because no single nation has enough market leverage on its own," Baskaran says.
The Scale of Disruption
The scale of disruption caused by China’s strategy is difficult to overstate. The closure of Jervois Global’s cobalt mine in Idaho and BHP’s Nickel West project in Australia illustrates how fragile western efforts are when exposed to this kind of strategic economic pressure. Chinese companies can afford to operate at near-zero or even negative profit margins, squeezing out foreign firms that need to show a return on capital.
Tariffs Alone Won’t Cut It
To date, responses from the US have largely focused on domestic industrial policy, including subsidies, tax credits, and isolated tariffs. However, given the country’s relatively small share of global minerals demand, US actions alone are unlikely to make a significant difference. "While tariffs can be an effective instrument, a single country acting alone is unlikely to make a significant difference for mineral prices given the small size of their offtake markets," Baskaran stresses.
The Proposed Solution
Instead, Baskaran suggests that any meaningful response must involve coordinated policy across a coalition of major consuming nations. The proposed solution is a shared "anchor market" – a bloc of like-minded countries that harmonize tariffs, coordinate investment protections, and implement shared procurement rules. If executed well, this approach could flip the current dynamic, placing reciprocal pressure on China while supporting market conditions where western producers can survive.
Leverage Through Scale and Policy
The power of an anchor market lies in its ability to send long-term price signals and create investor certainty. Gradual import quotas, for instance, could mandate that a growing share of mineral inputs come from within anchor market countries. This would offer a durable guarantee that demand will materialize, helping de-risk large-scale mineral investments.
Australia’s Key Role and the G7’s Moment for Market Unity
Baskaran highlights that Australia stands out as a potential partner, with rich deposits of 31 critical minerals and advanced mining capabilities. The G7 summit in Canada offers a unique moment to align policy and formalize the anchor market concept. By doing so, the G7 nations and their partners could finally mount a credible economic counteroffensive: "The anchor market can shift leverage away from Beijing and toward a more resilient, rules-based minerals ecosystem."
Conclusion
In conclusion, the crisis in the supply of critical minerals requires a collective and coordinated response from major consuming nations. The proposed anchor market concept offers a potential solution, allowing countries to pool their market power and create a counterweight to China’s dominance. With the G7 summit offering a unique moment for policy alignment, the time for action is now. By working together, nations can create a more resilient and rules-based minerals ecosystem, ensuring the long-term security of critical mineral supplies.
