Companies face hidden supply-chain vulnerabilities as rising demand for critical minerals threatens production, prompting calls for stronger risk management, diversification and strategic investment.
Critical mineral shortages are becoming a boardroom concern for industrial companies, with businesses facing potential production disruptions even when the materials involved represent only a fraction of procurement costs.
A report by Boston Consulting Group (BCG), Why Critical Mineral Shortages Are a CEO Issue, warns that companies underestimate their exposure by focusing on spending, direct suppliers and mining locations while overlooking vulnerabilities deeper within supply chains.
BCG estimates that demand for key inputs, including rare-earth elements, graphite, copper and lithium, could reach 120% to 250% of forecast supply through 2040.
Batteries and electrification are projected to increase critical mineral demand 20-fold by 2040, while artificial intelligence and defence spending could drive demand to triple and quadruple, respectively.
The report argues that mineral security must become a strategic priority for chief executives rather than remain solely a procurement responsibility.
Hidden vulnerabilities threaten production
BCG identifies three blind spots that leave companies exposed to shortages.
The first is overreliance on spending data. Businesses typically prioritise commodities such as copper and lithium because of their substantial procurement costs, overlooking smaller markets whose materials are indispensable to high-value products.
BCG calls these inputs “mosquito minerals”: materials with small markets but potentially enormous consequences when supplies are interrupted.
Gallium illustrates this risk. Its global market is worth less than $350 million annually, yet approximately $3.5 trillion in final products depend on it, including advanced chips, artificial intelligence processors and telecommunications components. Substitutes are unavailable or technically challenging for many applications.
Germanium, essential for electronics and fibre optics, has experienced significant market disruption following export restrictions. Western market prices roughly quadrupled during the period described in the report.
Ultra-high-purity arsenic presents another vulnerability. Used in semiconductors for telecommunications, data centres and defence electronics, it has a global upstream market of approximately $50 million.
China controls about 90% of refining, while one Japanese producer supplies roughly 60% of global ultra-high-purity arsenic.
Such concentration means a disruption at a single facility could threaten production across multiple industries.
The second blind spot is focusing exclusively on direct suppliers. Minerals can be embedded in components, machinery and manufacturing equipment, leaving companies vulnerable even when they do not purchase raw materials themselves.
For example, aerospace manufacturers rely on tungsten-carbide cutting tools bonded with cobalt. Concentrated tungsten supply and cobalt production risks can disrupt tool availability, potentially halting production lines.
The third blind spot is assessing mining locations without examining processing capacity and ownership. China refines roughly 90% of rare earths and processes significant shares of lithium, cobalt and graphite.
Companies may therefore remain exposed to geopolitical risks even when sourcing from facilities outside China if Chinese companies retain ownership interests.
Public financing offers opportunities
BCG says businesses are also missing opportunities to access government-backed financing designed to strengthen critical mineral supply chains.
Public finance commitments to critical minerals in advanced economies reached approximately $65 billion in 2025, more than four times the 2023 level. However, much of this capital remains undeployed.
Funding mechanisms include co-investment, guarantees and long-term offtake agreements, although recipients face conditions such as reporting obligations, governance requirements and domestic supply-chain commitments.
Siemens Gamesa signed a five-year supply agreement with Australia’s Arafura Rare Earths to secure neodymium and praseodymium for wind-turbine magnets.
The agreement also helped meet conditions for potential German government-backed financing for Arafura’s mining and processing project.
Japanese conglomerate Mitsui secured rights to purchase 40% of copper concentrate from Argentina’s Josemaria deposit through a government-organised tender.
Commodity trader Traxys also became a procurement partner for the US strategic mineral stockpile initiative, Project Vault.
These examples demonstrate how companies can strengthen supply security while creating commercial opportunities through government partnerships.
Five steps towards resilience
BCG recommends five measures for managing mineral risks.
First, companies should map dependencies across their entire value chains, including components, processing facilities, ownership and replacement lead times.
Second, they should diversify suppliers, materials and geographical sources, ensuring alternatives do not depend on the same upstream bottlenecks.
Third, businesses can redesign products to accommodate alternative materials or chemistries. The report cites cobalt-free lithium iron phosphate batteries as one way to reduce dependence on constrained minerals.
Fourth, circular business models can recover and reuse materials through recycling, product-return incentives and closed-loop arrangements.
Fifth, companies can secure greater supply control through long-term purchasing agreements, strategic inventories, joint ventures or investments in upstream projects.
BCG cautions against excessive stockpiling, unnecessary contracts and poorly timed acquisitions that tie up capital or increase exposure to commodity cycles.
Ultimately, the report urges chief executives to treat critical minerals as a strategic business issue. Companies that identify vulnerabilities early can protect production, access financing and strengthen competitiveness before shortages disrupt operations.
