Price volatility in critical minerals, driven by China’s dominant market, is delaying or scrapping nearly one in four global energy-storage projects, disrupting investment decisions worldwide.
According to a report by law firm DLA Piper, 23% of investors, lenders, developers, and producers cited unpredictable pricing for materials like lithium, cobalt, and graphite as the reason for shelving otherwise viable projects. The report, published on Tuesday, shows growing geopolitical risk tied to strategic minerals.
“For a lot of the niche critical minerals, there isn’t an index, so you can’t have index-based pricing,” said Oliver Wright, a partner specialising in energy and natural resources at DLA Piper. “And where indices do exist, they’re often influenced by China.”
DLA Piper surveyed 550 industry professionals across 15 countries. The findings reveal a stark regional divergence. In the United Kingdom and US, 72% and 64% of respondents, respectively, viewed price volatility as a severe obstacle. In Germany, fewer than 10% shared this concern, while participants in Italy, China, and Australia largely considered it a minor issue.
China’s Pricing Power Creates a Global Bottleneck
China’s dominance in critical minerals processing creates a single point of failure for global supply chains. Pricing for battery cell components is anchored to benchmark indices heavily influenced by China’s domestic market. This concentration, the report notes, exacerbates price swings due to the low liquidity of these markets compared to major commodities like oil or gas.
The report added that some markets could be “manipulated” by major participants, a direct consequence of Beijing’s strategic control. This vulnerability was evident earlier this week when Beijing extended a suspension of export controls on strategic materials like rare earth elements and lithium batteries as part of a trade truce with Washington. South China Morning Post
Mineral Price Volatility Delays Energy-Storage Projects
- 23% of energy-storage projects face delay or cancellation due to critical mineral price volatility.
- Regional disparity is stark, with the US and UK facing significantly higher obstacles than Germany and China.
- Industry response is shifting towards vertical integration and alternative pricing models to reduce reliance on Chinese benchmarks.
Price Instability Alters Investment Calculus and Creates Market Openings
The price instability is not just a headline; it translates to tangible financial consequences. Companies are being forced to alter their investment calculus. Over half of all respondents in the DLA Piper survey classified mineral price volatility as either a major constraint or a deal breaker for new mining and processing ventures.
This uncertainty is creating a market opening for competitors. As investors seek to reduce exposure to Chinese pricing influence, Japan and South Korea are emerging as promising alternative processing hubs. Both nations are “widely seen as second only to China in advanced battery chemistry and critical mineral processing capability” while remaining more cost-effective than the US market.
| Region | % Viewing Volatility as Severe Obstacle |
|---|---|
| United Kingdom | 72% |
| United States | 64% |
| Germany | < 10% |
Alternative Pricing Models and the Search for Stability
The report predicts a move away from purely China-influenced benchmarks. “We expect the industry to shift what contracts are priced against, whether that is component-linked pricing, price floors or hybrid structures,” Wright said.
This push for stability is manifesting as a strategic pivot towards vertical integration. Companies are moving up the supply chain by investing directly in mining and exploration to secure greater control over their raw material inputs. This is a direct response to the geopolitical risk inherent in relying on a single, dominant supplier for critical components.
The DLA Piper report said that the pricing model faced challenges because of low market liquidity and benchmark influences, with the industry expecting shifts toward component-linked pricing, price floors, or hybrid structures.
The drive for component-linked pricing or hybrid models is a direct attempt to align incentives and reduce exposure to opaque and volatile mineral markets.
China's Mineral Grip Drives Trade Tensions
Beijing’s grip on critical minerals has become a central issue in trade negotiations with the US and Europe. The underlying tension over supply chain security remains a defining feature of the sector.
Investors will be watching for further signals on China’s policy direction as markets open.
“For a lot of the niche critical minerals, there isn’t an index, so you can’t have index-based pricing,” said Oliver Wright, a partner specialising in energy and natural resources at DLA Piper. “And where indices do exist, they’re often influenced by China.”
