Many emerging markets (EMs) are rich in critical minerals, which are becoming increasingly strategic as governments compete to secure supplies and reduce supply-chain vulnerabilities.
This gives those EMs a unique position in the critical minerals race, and they are seeking to capture more value from their resources by developing domestic processing, refining, and vertically integrated industries.
Policy execution will be critical as different countries pursue different approaches to building downstream capacity and attracting investment.
The race for critical minerals is reshaping global trade, industrial policy, and geopolitics. As demand surges, EMs are moving beyond extraction—seeking to capture more value by building out domestic processing and refining. And that can lead to opportunities for EM debt investors.
The Critical Minerals “Gold Rush” Moment
Critical minerals are the building blocks of modern life, powering everything from consumer electronics to defense systems, AI infrastructure, and the energy transition. While definitions vary by country, most critical mineral lists converge on commodities such as lithium, copper, nickel, and rare earth elements.
In recent years, governments worldwide have rolled out critical mineral strategies in response to an increasingly fragmented geopolitical landscape and the strong long-term demand outlook. The scramble for control over these supply chains has drawn frequent comparisons to a modern-day gold rush—although this one is broader in scope, more strategic in nature, and increasingly driven by national policy objectives.
Competing Strategies in the Critical Minerals Race
The global race for critical minerals has created a geopolitical tug of war between the United States and China, Europe and China, and, more broadly, developed markets and EMs. As the United States and Europe seek to secure alternative sources of critical minerals, expand domestic processing and refining capacity, and reduce reliance on China, competition is increasingly influencing trade, investment, and industrial policy worldwide.
The United States has published a critical minerals list and launched Section 232 investigations aimed at strengthening its position in these supply chains while protecting domestic industries from foreign competition. Similarly, the European Union’s Critical Raw Materials Act seeks to boost domestic production of key minerals, diversify supply sources, and reduce vulnerability to market disruptions and price shocks.
EMs are using mineral wealth as both a geopolitical tool and a catalyst for investment, industrial development, and economic growth.
EMs sit at the epicenter of this tug of war because many of the world’s critical mineral reserves are concentrated in many of these countries. Their objective is not only to protect domestic resources, but also to develop vertically integrated industries and capture more value across the full supply chain. While developed-market policies have largely responded to concerns over supply-chain concentration and China’s growing dominance, EM frameworks are more proactive—using mineral wealth as both a geopolitical tool and a catalyst for investment, industrial development, and economic growth.
Brazil, for example, is a major player in the critical minerals race, holding the world’s second-largest rare earth reserves, accounting for more than 20% of the global total. The country has introduced the Critical and Strategic Minerals Bill, which provides tax incentives and guarantees a credit fund for the development of resources.
India is another rare-earth leader, with the world’s third-largest reserves after Brazil, and it, too, has sought to protect its role in the supply chain with the launching of the National Critical Mineral Mission, which will focus on local mining and processing of 24 vital minerals, acquisition of mining blocks overseas, and recycling of critical metals.
Rare Earth Reserves Are Concentrated in a Small Number of Countries
Sources: USGS and William Blair, as of August 2026. Other countries combined include United States, 2.1%; Greenland, 1.6%; Tanzania, 1.0%; South Africa, 0.9%; Canada, 0.9%; Thailand, 0.0005%; and rest of world, 1.1%.
China, however, remains the dominant force in rare earths, controlling nearly half of global reserves. This excludes additional resources secured through joint ventures, particularly in Africa, which holds around 30% of global mineral reserves. Researchers estimate that close to 40% roughly of Africa’s future rare-earth supply is committed to Chinese buyers via offtake agreements. China’s influence is even greater in production, accounting for nearly 70% of global output. China takes a more integrated approach, focusing on the entire value chain from the outset—from ownership of enabling infrastructure such as ports and railways to project financing and equipment supply.
Global Rare Earth Mine Production by Country (in Thousand Tons)
Sources: USGS and William Blair, as of August 2026.
The Refining Issue
The concentration of reserves in certain countries—particularly in EMs—creates incentives to develop domestic ore extraction capacity and attracts international investors. However, refining minerals into finished products remains a significant challenge. Smelting and refining are capital- and energy-intensive, often generate relatively low returns, and may be constrained by limited access to reliable power.
China controls more than 90% of global rare-earth refining capacity and roughly 70% of processing capacity for many critical minerals. This dominance has been built over decades through a broader strategic effort that included sustained state support, subsidies, and, at times, below-market pricing that weakened overseas competition.
To us, this is the central challenge that resource-rich EMs must address.
Capturing the full value of these resources will likely require substantial investment.
Brazil is blessed with a high-grade rare-earth resource that is relatively easy to extract, so mining should attract an abundance of domestic and foreign investment. However, capturing the full value of these resources will likely require substantial investment in downstream refining capacity, which may not always be commercially viable and could therefore require government support.
Several Brazilian initiatives suggest the country may avoid the experience of resource-rich markets such as Australia, where much of the value is lost because raw ore is exported for refining and processing elsewhere. Brazil is considering the creation of a national critical-metals company, with support from its development bank and national oil company, as well as tax incentives for downstream processors.
India’s case is more complex, given its greater reliance on Chinese imports and limited domestic expertise in downstream metals processing. But India, much like its young population, can quickly jump on the learning curve as it has done in other industries, such as solar cells and modules manufacturing. India’s focus on recycling can also alleviate some of its import reliance, and its recent royalty reform is promising for the industry.
Lastly, Indonesia provides a good example of how emerging countries can tackle the mining-versus-processing dilemma. The country banned exports of nickel ore, helping domestic producers vertically integrate. It also provided tax holidays and other incentives to domestic downstream processing players, allowing for an influx of investments. Indonesia is now a powerhouse across the value chain of nickel products and basically a market maker when it comes to nickel pricing.
The Next Chapter
The race for critical minerals is no longer about who owns the resources, but who can build the industries around them. EMs hold many of the world’s largest mineral reserves, giving them a unique opportunity to move up the value chain and capture a greater share of the economic benefits. Success, however, likely depends on policies that attract investment, develop technical expertise, and support downstream processing. Countries such as Indonesia have already demonstrated what is possible, while Brazil and India are taking important steps in the right direction, suggesting that the next chapter of the critical minerals story may be written in EMs.
Alexandra Symeonidi, CFA, is a senior corporate credit and sustainability analyst on William Blair’s emerging markets debt team.
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