Critical Mineral Supply Chains Need Securing, say G7 Leaders
As part of the talks taking place at the Évian summit, hosted in France, G7 leaders have agreed to a targeted reduction of dependency for rare earths and permanent magnets.
The proposed agreement is for sourcing from non-G7 suppliers to fall to less than 60% by 2030, with a long-term goal of 50%. Other critical minerals will also get similar hard targets by the end of 2026.
Supply chains need to diversify more than ever before, with resilience becoming crucial in the face of regular global disruption and rising geopolitical tensions.
EU supply chain intervention
The current dominance of non-G7 suppliers of critical minerals, China in particular, is staggering. International Energy Agency (IEA) data shows that it accounts for over 90% of global rare earth refining capacity.
This measure from Western leaders is the latest in the efforts to secure supply lines that are likely to be susceptible to geopolitical disruptions at some point in the future due to their monopoly on certain goods.
It is clear that the G7 is moving towards a more direct market intervention. The release on the G7 website outlined this, adding: “We also continue to explore demand and supply-side measures such as diversification requirements, revenue stabilisation mechanisms including price-gap subsidies, joint procurement instruments and trade-related instruments such as quotas and price floors.”
Digital traceability on G7’s radar
Going further in its effort to tackle the supply chain issue of the illegal transfer of waste rich in critical minerals, the G7 have committed to improving the enforcement of laws and international frameworks and digital traceability.
“We recognise digital traceability and extended producer responsibility schemes for manufactured products are effective tools for helping to achieve these objectives of developing a circular economy for critical minerals,” the release details.
It will begin this action with two pilot materials, lithium and nickel, and then expand this with five new minerals every year. G7 leaders have also noted that particular attention will be given to rare earths.
Coordinated stockpiling
To combat the single global stockpile, G7 members have outlined plans to build out domestic industrial and public stockpiles, to improve the “security of supply and stability of the market”. It will then tie those together with an IEA-backed data sharing and alert system in order to anticipate and better manage supply shocks.
Partner and emerging economies would also be included in this data environment, with the release stating that the G7 “intend to leverage stockpiling mechanisms to support the diversification of critical minerals supply chains, including in partner and emerging economies”.
Recycling and environmental impact were also critical components of the declaration on securing supply chains for critical commodities from world leaders. Recycling targets are expected to be announced by the end of the year for selected critical minerals or their derivatives.
Critical Minerals Resilience Alliance launched
As part of its efforts to coordinate efforts, the non-binding G7 Critical Minerals Resilience and Production Alliance has been agreed. This permanent, non-binding institutional collaboration has been established to streamline existing individual country strategies and create a unified ‘buyers' club’.
Subject to the approval of the countries already participating, the initiative will be open to like-minded partners and seeks to provide a “comprehensive platform for cooperation within the G7 and partner countries to strengthen the diversification and resilience of critical minerals value chains and streamline existing initiatives on critical raw materials”.
For global supply chain strategies, the Évian Declaration appears to show a move towards G7 institutionalisation. Supply chain leaders will need to evaluate their strategies with a clear eye on geopolitical risk and locking down supply lines is likely to prove more crucial than ever going forwards.