The contest over critical minerals is usually framed as a race for deposits. The more consequential contest is over what happens to the ore after it leaves the ground. Mining is geographically diffuse, processing is not. It is the separation, refining, and alloying stages, the midstream, where supply chains narrow to a handful of chokepoints, and where a single export licence can idle factories a continent away.
Demand is the backdrop. The International Energy Agency projects lithium demand rising several-fold and graphite and rare-earth demand more than doubling by 2040, driven by batteries, magnets, and grids. Supply, however, is tightening at the processing stage rather than easing. Per the IEA’s Global Critical Minerals Outlook 2025, China is the leading refiner for 19 of the 20 strategic minerals it tracks, with an average market share near 70 percent. The average share of the top three refining nations rose from about 82 percent in 2020 to 86 percent in 2024, and is projected to fall only marginally, back to roughly 82 percent, by 2035. Concentration, in other words, is structural, not transitional.
The asymmetry is starkest in rare earths. USGS data put 2025 world mine production near 390,000 tonnes, of which China supplied about 270,000 tonnes, roughly 69 percent. Its share of processing is far higher, on the order of 90 percent, and for heavy rare earths such as dysprosium and terbium it approaches 99 percent. Graphite anode processing is near-total. Refined cobalt is about three-quarters Chinese. For yttrium oxide China holds over 90 percent of capacity. Price gaps reveal the leverage. After Beijing’s controls, yttrium oxide was quoted around $7.88 per kilogram inside China against roughly $1,175 in Europe.
The rare-earth value chain has four stages, oxide, metal, alloy, and finished magnet, and it is the middle two that determine independence. A country can mine its own ore, or buy diversified ore from Australia or Brazil, and still depend entirely on Chinese plants to convert it into usable material. That is the crux. Solvent-extraction separation of rare earths can require up to 180 counter-current stages, demanding tight control of chemistry and contamination; the process knowledge, reagents, and specialised equipment remain concentrated in China after three decades of accumulated learning and tolerated environmental cost. Diversifying mines addresses the loose constraint while leaving the tight one untouched.
The policy response has shifted from securing rock to building midstream capacity. The United States has moved most decisively. Its Defense Department has committed over $439 million since 2020 and, in July 2025, took a $400 million preferred-equity stake in MP Materials, set a $110-per-kilogram price floor for neodymium-praseodymium, and guaranteed magnet offtake, a demand signal explicitly modelled to de-risk domestic production. A subsequent $1.4 billion package backed recycling-and-magnet firms Vulcan Elements and ReElement. Japan’s JOGMEC underwrote Lynas’s separation capacity rather than merely taking ore. Tokyo cut Chinese dependence from over 90 percent to under half within a decade of 2010, though it drifted back toward two-thirds by 2024. Australia is financing domestic refineries (Iluka’s Eneabba plant, backed by a A$1.25 billion loan) and offers a 10 percent production tax credit. Lynas became the first producer of separated dysprosium outside China in 2025. A parallel track is to leapfrog through innovation, rare-earth-free magnets, and recovery from mine tailings and e-waste. Meanwhile resource holders, Indonesia (nickel), Namibia, Chile, and Brazil, are banning raw-ore exports to force value addition at home.
India has moved from statements to instruments. The National Critical Mineral Mission, approved in January 2025, carries a government outlay of Rs 16,300 crore within a Rs 34,300 crore total over seven years. In November 2025 the Cabinet approved a Rs 7,280 crore rare-earth permanent-magnet scheme, Rs 6,450 crore in sales-linked incentives plus a Rs 750 crore capital subsidy, targeting 6,000 tonnes per annum of sintered magnet capacity. The 2026-27 Budget announced rare-earth corridors spanning Odisha, Kerala, Andhra Pradesh, and Tamil Nadu. The MMDR Amendment Act of 2023 gave the Centre exclusive auction powers over 24 critical minerals, removed several from the restrictive atomic-minerals list, and introduced exploration licences via reverse bidding. Import duty on monazite has been removed and a recycling incentive is planned. Yet the base is thin: India’s rare-earth mine output is roughly 2,900 tonnes, under one percent of the world’s, processing is concentrated in the state-owned IREL, and imports meet an estimated 85-90 percent of demand by volume, overwhelmingly from China, even as magnet imports doubled in 2024-25.
India’s six key constraints. First, feedstock and reserves: India holds about 7.23 million tonnes of rare-earth oxides in monazite, but the ore is thorium-bearing, entangling it in atomic-energy regulation, and validated, mineable reserves remain limited. Second, separation technology: capability exists only at pilot scale in CSIR-NML and BARC, with no commercial-scale solvent-extraction or SX-EW/HPAL lines. Third, purity: Indian facilities cannot yet deliver the ultra-high purity that battery-grade lithium and high-performance magnets demand. Fourth, waste management: rare-earth and nickel processing generate radioactive tailings and acidic sludge that require containment systems India has not built at scale. Fifth, process control: the sector lacks digitised, continuous control systems essential for consistent, safe, scalable refining. Sixth, scale and institutions: capability sits in a single public enterprise, coordination across ministries is fragmented, and small volumes cannot match Chinese economies of scale, high power costs, or capital availability.
The sequencing lesson from every successful case is to build processing in parallel with mining, not after it. Overseas feedstock deals, and India’s resource diplomacy with Australia, the United States, and others, should be bent to feed Indian refineries rather than, by default, Chinese ones. A Quad-anchored Indo-Pacific processing hub, Australian ore, Japanese technology, Indian refining, American demand and capital, offers a credible template. Domestically, India should pair viability-gap funding and guaranteed offtake or price floors (the MP Materials model) research push into bioleaching, advanced solvent extraction, ultra-high-purity fabrication, and recycling. Export restrictions to promote downstream industry are justified only once processing capacity exists. The window is narrow, and incremental effort will not close it. What India needs are radical, time-bound interventions aimed squarely at the midstream, the link that confers real leverage.
*Aditya Sinha writes on macroeconomics and geopolitics. Shaurya Pandey is a Technology & Finance Strategy Consultant.
