-
Rare earth metals are the lifeblood of AI tech development.
-
Yet the market is immensely concentrated, Barclays found
-
Rocketing demand for the key minerals could lead to soaring prices.
The artificial intelligence race is a much a scramble for physical resources as it is a contest to maximize computing capabilities.
The AI boom has fueled a fresh surge of demand for rare earth minerals, key components at the heart AI technology and hardware, but the global market for these materials is highly complex and easily disrupted.
“These scarce, highly concentrated inputs are extremely vulnerable to disruption, making them the new battlegrounds for AI supremacy,” Barclays analysts said in a report published on Friday.
In a detailed analysis, the bank outlined just how uneven the rare earth trade has become, implying serious consequences for prices and technological advancement
These elements, unique for their magnetic qualities, are the lifeblood of semiconductor and data center technology. Yet critical metals such as copper, lithium, aluminum, nickel, and cobalt are controlled by just a few market players.
Here are three things to know about the market for the metals making the AI boom possible.
There’s no disputing that the rare earth market is profoundly concentrated.
At the center is China, whose dominance in both mining and processing gives it a “near monopoly.”
“China stands out as the leading global supplier of refined minerals, providing close to 80% of processed cobalt, 65% of refined lithium, 44% of refined copper and 27% of refined nickel,” the bank wrote. “Overall, it commands close to 50% of the global refined minerals market.”
Beijing is well aware of its leverage in this space. After President Donald Trump unleashed steep tariffs last month, China struck back with export controls on rare earth metals.
According to the Center for Strategic and International Studies, the US is particularly vulnerable to a rare earth squeeze. Currently, there is no heavy rare earth separation occurring in the US. Losing access to these materials has implications for everything from chip production to defense manufacturing.
Yet, there might be breathing room down the road. China may hold the crown when it comes to refined metals and magnetic minerals, but other countries are developing a foothold in the trade of unprocessed minerals.
Chile, the Democratic Republic of Congo, and Guinea are among the leading producers, each dominating a specific ore. These countries have been focusing on improved mining capabilities, and Guinea’s aluminum exports have grown twelvefold since 2010.