The UK’s critical minerals wake-up call: why midstream processing is the missing link
With rising geopolitical tensions and soaring demand for rare earth elements, the UK must invest in midstream critical mineral processing to reduce reliance on China and secure its defence, energy, and technology sectors, says Nitesh Shah
I have over 30 years’ experience across commodities, mining and advanced materials –watching as the UK and the West first externalised their critical mineral supply chains to China – and then over the past few years rush to regain control of these essential assets.
China dominates between 80 – 100 per cent of the rare earth elements (REEs) market. The US imports 74 per cent of its REEs from China, whilst the UK imports at lower levels – because we import more finished goods. These risks are set to be compounded as demand for REEs grows massively over the coming years – driven by the energy revolution, the move to advanced electronics and AI, and by defence requirements.
The war in Ukraine and the escalation of US-China trade tariffs have been the spotlights that have illuminated the need for Western independence from Russian and Chinese supply chains. Recent US – Chinese trade tensions resulted in April’s announcement by China of further export controls upon 7 REEs – including elements like scandium and its alloy aluminium scandium – which has unique application in advanced semiconductor manufacturing. These controls have been a shock to the critical materials supply chain – but a necessary one.
Critical minerals are central to defence
The greatest threats beyond the semiconductors and electronics sectors are within defence. Across fighter jets, nuclear submarines, anti-drone defences, ballistics, advanced defence electronics – critical minerals are central – critical minerals from China. The UK has no domestic primary sources and an underinvested midstream. Currently everything must be imported, so this month’s Strategic Defence Review is welcomed in recommitting the UK government to its March pledge to establish UK Defence Innovation – and with £400 million – so scaling-up UK technologies which align with building-out UK critical mineral security.
The new UK critical minerals strategy being published this month – and the new industrial strategy also out this month, look to combine critical mineral demand with UK industries future requirements across sectors including advanced manufacturing, defence and clean energy. The previous government’s critical mineral strategy (2022) built a very basic framework but one too general and it missed the opportunity to utilise the resources and expertise of the UK – particularly midstream processing. Small-scale funding came later – £15m for the CLIMATES programme. Compare this with Canada, for example, which backed its own strategy with nearly $4bn in its 2022 budget. In the words of the founder of one the UK’s leading critical minerals mining operations, the UK’s strategy was “a wish list with no substance in terms of finance”.
The UK’s limitations mean we have to focus more acutely upon our advantages – we have few natural resources bar lithium, tin and tungsten – but we do have the City and the opportunity to lead in critical mineral financing, we have great human capital and fundamentally these recent critical mineral shocks should provide the impetus for UK Plc to orient itself around one of its key advantages – as a global midstream player.
Why is the midstream so important? Take magnets as the example: required in wind turbines, EVs and military aircraft. China controls over 70 per cent of the REEs required – but in terms of the processing of the material into usable metal for downstream applications, this figure rises to around 87-89 per cent. Although in recent years the UK and the US has seen extensive funding for new magnet production with greater mining and manufacturing occurring in the West, midstream processing is still within China. And this midstream risk applies to all REEs and many critical minerals.
Companies like mine – based in South Yorkshire – an advanced materials midstream processor focussed on reducing oxides of critical minerals including REEs like aluminium scandium alloys – into critical material metal, alloy and high entropy alloy powders with partners and customers across the semiconductor, capacitor, hypersonics, space, defence and clean energy sectors – can at scale provide UK domestic midstream capacity that can radically derisk western critical material supply chains.
Given present geopolitics – our hopes are that the new critical minerals and industrial strategies will finally make midstream the centrepiece – and that funding will finally match ambition.
Nitesh Shah is CEO of Metalysis