Securing the Supply Chain: China’s Critical Minerals Network and the Security Risks for the Americas

Diálogo Américas | Maria Zuppello

Latin America's critical minerals market, valued at approximately $180 billion, is facing deep integration into China's industrial supply chains as Beijing expands its control over regional lithium and copper reserves. This consolidation directly threatens the national security of Western nations reliant on these materials for advanced defence manufacturing.

Historically, Chinese state-owned enterprises have leveraged direct investments, such as the $20 billion mining portfolio in Peru and the La Arena project, to monopolise downstream refining. Consequently, sixty-two per cent of regional mineral exports remain unprocessed raw materials, leaving local economies vulnerable to predatory pricing and supply manipulation. This extreme market concentration severely weakens local bargaining power. To counter this dominance, Argentina, Chile, and Brazil are implementing national strategies like Brazil's National Mining Plan 2050 to build domestic processing capacity and establish diversified, integrated commercial networks with the United States and the European Union.

Comment

Beijing's consolidation of the Latin American mining sector, exemplified by the acquisition of the Las Bambas copper mine in Peru, demonstrates how state-backed capital distorts traditional market competition. By utilising state-owned enterprises that operate on non-commercial terms, China artificially depresses raw material prices to crowd out Western private investment. This asymmetric financial backing allows Chinese firms to absorb short-term losses that would bankrupt commercial competitors, effectively securing a monopsony over regional extraction.

The mechanism of this economic leverage relies on integrating upstream extraction with domestic refining infrastructure, rendering regional initiatives like Argentina's Large Investment Incentive Regime (RIGI) partially dependent on Chinese processing facilities. Without independent, high-value processing alternatives, Western defence supply chains remain structurally exposed to targeted export restrictions, similar to Beijing's previous embargoes during the Senkaku Islands dispute. Consequently, the financial viability of alternative supply networks depends on Western willingness to subsidise higher-cost processing operations to offset Zijin Mining's predatory pricing.

Strategic Question for Discussion

If Western nations fail to subsidise domestic processing, how can alternative frameworks like Argentina's Large Investment Incentive Regime (RIGI) resist the market-distorting pricing power of state-backed entities like Zijin Mining?

The trajectory indicates that without external financial guarantees, initiatives like RIGI will inevitably default to Chinese off-take agreements due to the sheer scale of Zijin Mining's capital reserves. Consequently, the viability of these regional frameworks depends on the establishment of guaranteed purchase agreements by Western defence procurement agencies to bypass Beijing's pricing controls.

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