The global shift toward clean energy is accelerating, driven by climate commitments, technological advancements, and geopolitical realignments. At the heart of this transition lie critical minerals – lithium, cobalt, and nickel – essential for electric vehicles (EVs), batteries, and renewable energy infrastructure. As we enter the second half of 2025, supply-demand imbalances, geopolitical tensions, and evolving ESG policies are reshaping the landscape. Here’s what investors and industry players need to know.
Current Market Dynamics
The critical minerals market remains tight, with demand outstripping supply despite recent expansions in mining and refining capacity. Lithium prices have stabilized after volatility in 2023 – 24 (IEA World Energy Investment 2024), but long-term contracts dominate the market, leaving spot buyers exposed.
Cobalt, heavily concentrated in the Democratic Republic of Congo (DRC), faces persistent ESG scrutiny (USGS Mineral Commodity Summaries 2025), while nickel struggles with oversupply from Indonesia’s low-cost production (CRU Cobalt and Nickel Market Quarterly, Q2 2025).
Key Trends in H2 2025:
- EV Demand Slowdown? Growth in EV sales remains robust but has moderated in Europe and North America due to higher financing costs and subsidy adjustments. Asia, particularly China and India, continues to drive volume (BloombergNEF EV Market Tracker, H1 2025).
- Supply Chain Diversification – Western nations are aggressively funding alternative supply chains via partnerships with Australia, Canada, and Africa, reducing reliance on China, which still controls 60–70% of refining capacity (IEA Global Critical Minerals Outlook 2025).
- Stockpiling & Strategic Reserves – The EU and US are increasing mineral reserves, mirroring China’s long-standing strategy (European Commission CRMA Implementation Guidelines 2025), adding upward price pressure.
The ESG Wildcard
Environmental, Social, and Governance (ESG) policies are in flux. The EU’s Critical Raw Materials Act (CRMA) and the US’s Inflation Reduction Act (IRA) tie subsidies to stringent ESG compliance, forcing miners to adopt cleaner extraction methods (European Commission, U.S. Department of Energy).
However, 2025 could see:
- Relaxed ESG Rules in Some Jurisdictions – As governments prioritize supply security, minor concessions on mining permits or emissions may emerge.
- Stricter ESG in Europe – The EU’s Carbon Border Adjustment Mechanism (CBAM) may penalize high-emission nickel and cobalt imports, favoring low-carbon producers.
- Asian Divergence – China and Indonesia face mounting pressure but may delay stringent ESG enforcement to maintain production dominance.
Geopolitical Risks & Asian Influence
Asia’s dominance in refining and battery production ensures it remains the linchpin of the clean energy transition.
Key Risks:
- China’s Export Controls – Rare earth export curbs (as seen in 2023) could recur, disrupting global supply.
- Indonesia’s Nickel Boom – The country supplies over 50% of global nickel but faces lawsuits over environmental damage, potentially destabilizing supply (CRU Group; S&P Global Nickel Price Outlook, June 2025).
- India’s Rising Role – New Delhi is positioning itself as an alternative battery hub, leveraging free trade deals with Australia and Africa
Asia’s Strategic Leverage Over EU Clean Tech
Europe’s ambitious green transition is increasingly dependent on Asian supply chains, creating both vulnerabilities and opportunities. China dominates the processing of lithium, cobalt, and rare earths (IEA), while Indonesia supplies over half of the world’s nickel.
This reliance leaves EU automakers and renewable energy firms exposed to:
- Export Restrictions – China’s past limits on graphite and gallium exports (2023) demonstrated its willingness to weaponize supply chains.
- Price Volatility – Indonesian nickel policy shifts (e.g., export bans, production quotas) have previously triggered market turbulence.
- Subsidy Competition – Asian governments, particularly China, offer substantial incentives for domestic EV and battery production.
However, the EU is responding with:
- Trade Partnerships – Securing raw materials via deals with Australia, Canada, and Chile.
- Onshoring Efforts – Subsidizing local refining and recycling to reduce dependence.
- ESG-Driven Trade Barriers – The CBAM may penalize emissions-intensive Asian nickel and cobalt imports, favoring greener suppliers.
The outcome hinges on whether Europe can scale alternatives fast enough – before Asia tightens its grip.
US Trade Policy: Shifting Dynamics in Critical Minerals
Recent US trade initiatives are gradually reshaping the global critical minerals landscape, with a focus on strengthening partnerships and supply chain resilience. Under the Inflation Reduction Act (IRA), the US is encouraging mineral sourcing from allied nations while fostering domestic production.
Key developments include:
- Trade Preference Adjustments – Expanding duty-free access for minerals from strategic partners such as Australia and Canada.
- Supply Chain Diversification – Engaging with resource-rich nations in Africa and Southeast Asia to establish sustainable mineral partnerships.
- EV Incentive Structures – IRA tax credits tied to regional sourcing criteria are influencing automakers’ procurement strategies.
While these measures aim for long-term stability, near-term dynamics still reflect current dependencies and constraints.
Investment Outlook: 2025 – 2030
Short-Term (H2 2025–2026):
- Lithium: Prices may rebound as new EV models and grid storage absorb current surplus.
- Cobalt: Demand growth depends on battery chemistry shifts (e.g., high-nickel, low-cobalt).
- Nickel: Indonesian oversupply weighs on prices, but high-grade battery nickel retains premium value.
Long-Term (2027–2030):
- Recycling Gains Traction – Second-life batteries and scrap recovery could meet 15 – 20% of demand by 2030 (IEA, World Bank).
- Tech Disruption – Sodium-ion and solid-state batteries may reduce lithium/cobalt needs, but gradual rollout delays market impact.
- Africa’s Rise – New lithium projects in Zimbabwe and Namibia could diversify supply, pending infrastructure development.
Where to Watch
- Mining Juniors vs. Majors – Smaller firms with high-grade deposits may become acquisition targets as automakers pursue vertical integration.
- Battery Gigafactories – Asia’s lead (China, South Korea) will persist, but EU and North America are scaling up.
- ESG-Linked Premiums – Traceable, low-carbon supply chains will attract higher valuations.
Bottom Line
The clean energy transition has entered a critical phase. While Asia’s dominance in refining and battery production persists, Western governments are responding with diversification policies, ESG-driven trade mechanisms, and industrial investment.
The mineral supply chain is becoming a battleground of strategic influence – between efficiency and resilience, between scale and standards. Over the next five years, investor strategies must account not only for commodity cycles, but for policy asymmetries, geopolitical leverage, and ESG performance.
What’s clear is this: the road to decarbonization runs through the mines – and whoever secures the cleanest, most resilient mineral supply chains will shape the future of global industry.
Sources
- International Energy Agency (IEA), Global Critical Minerals Outlook (2025); World Energy Investment (2024)
- U.S. Geological Survey (USGS), Mineral Commodity Summaries (2025)
- European Commission, CRMA Guidelines 2025, CBAM Assessments (2024 – 25)
- World Bank Group, Climate-Smart Mining Initiative (2025), Minerals for Climate Action (2024)
- BloombergNEF (BNEF), EV Market Tracker H1 2025, Battery Metals Outlook Q3 2025
- S&P Global Commodity Insights, Lithium & Nickel Forecasts, Trade Flow Analysis: Asia – EU
- OECD, Trade Policy & Critical Minerals (2024)
- Benchmark Mineral Intelligence, Gigafactory Assessment (2025)
- CRU Group, Cobalt and Nickel Quarterly Q2 2025
- IMF Working Paper, Geopolitics and Mineral Supply Chains (March 2025)