Critical minerals are rightly receiving a lot of policy and political attention these days. In a renewed era of economic and geopolitical competition, they’re increasingly seen as strategic assets with major industrial and national security implications.
If critical minerals are indeed strategic assets, Canada is well-positioned. We’re home to a range of these resources, including nickel, cobalt, graphite, lithium, rare earth elements, and more. The opportunity to leverage these resources is real and growing. Global demand is only accelerating. The U.S. and other allies are desperate to diversify their supply chains away from China. Canada is in a rare position to realize the economic benefits and make critical minerals one of the country’s chief contributions to the collective security of the West.
This won’t happen on its own though. It will depend in large part on public policy. That starts with recognizing that the mining sector involves a complex value chain and the role of policy will necessarily differ at each of the different stages.
Mining is as a spectrum of economic activities that includes exploration, permitting, extraction, processing, refining, and, eventually, commercialization. Yet a lot of policy conversations tend to treat critical minerals as synonymous with simply digging rocks out of the ground. That’s a serious conceptual limitation that risks producing an incomplete policy response.
The Carney government has begun to address part of the upstream challenge. Bill C-5 aims to streamline the permitting process for certain mining projects. This is a welcome and overdue reform. Canada has taken far too long to approve new mines. Fixing that bottleneck is necessary.
But it’s also insufficient. If we want to fully leverage our resource advantage, we need to move further down the value chain. That means building out processing and refining capacity—the essential midstream links that turn raw minerals into usable industrial materials.
Canada is home to foundational infrastructure, including major nickel refining in Newfoundland and Ontario, aluminum smelting in British Columbia and Quebec, and titanium processing in Quebec as well. But we’re missing processing capacity for the most strategic and fastest-growing minerals—namely, lithium, graphite, cobalt, and rare earth elements. That gap is now a strategic liability.
Here’s the core problem: China dominates global processing and refining. While it’s not the world’s largest miner, it’s unquestionably the largest midstream player.
The numbers are quite staggering. It refines approximately 90 percent of the world’s rare earth elements, 95 percent of graphite, 75 percent of cobalt (much of it sourced from the Democratic Republic of Congo), 60 percent of Class I nickel and nickel sulfate, and between 60 to 70 percent of lithium compounds such as hydroxide and carbonate. Even in aluminum smelting, it holds a commanding 55 percent global share. This dominance isn’t accidental. It’s the product of a decades-long, state-led strategy to capture the market.
China’s mineral processing power is now a chokepoint for the global economy. It affects everything from clean energy to defence. Western countries are alarmingly dependent on a geopolitical rival for the raw materials of the modern world.
That includes national security. These minerals are essential to weapons systems, radar, guidance, communications, and aerospace technologies. From drones to submarines to satellites, they’re embedded in the infrastructure of Western military power. Relying on China to process them is, bluntly, a strategic risk.
So what’s the solution?
It’s tempting to say “let the market decide.” But that’s unlikely to deliver the requisite investment on its own. The economics of building processing and refining capacity in Canada are challenging. Capital costs are high. Returns are long-dated. And it’s nearly impossible to compete on cost with Chinese state-backed companies.
If left entirely to market forces, it’s likely China’s dominance will only expand. Which is why public policy has a role to play. Supporting midstream investment in mineral processing isn’t a case of run-of-the-mill corporate welfarism. It’s a matter of national and collective defence. It may not involve buying tanks or warships, but it’s about securing the inputs needed to build those military assets.
Prime Minister Carney has recently indicated that these types of industrial investments could count toward Canada’s newly expanded NATO spending target of 5 percent of GDP on defence. He’s right. In fact, given Canada’s comparative advantage, this may be one of the most meaningful contributions we can make to the collective security of the West.
Of course, there are trade-offs. Government involvement in private-sector investment always carries risks such as market distortions, inefficiencies, and potential misallocations. But this isn’t about indiscriminate subsidies or propping up failing firms.
This is a clear and compelling case where markets alone won’t deliver, and where public policy is essential.
There are important questions about policy design: should governments use loan guarantees or direct subsidies? What role should provincial governments play? How do we attract allied partners like the U.S., Japan, or the EU into Canadian projects? These are real, technocratic issues.
But the normative or strategic case for supporting greater mineral processing and refining capacity in Canada as part of our contribution to collective security seems increasingly clear. We have the resources, and our allies are keen to source them from us. Reducing the West’s dependence on Chinese mineral imports would be good for everyone.
Yet without a policy agenda that addresses the midstream gap in Canada’s refining and process capacity, we’ll forgo these benefits. It’s time, therefore, to broaden our thinking. A critical minerals strategy that stops at the mine gate is not a strategy at all. It’s a missed opportunity—and a dangerous one at that.
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Sean Speer is The Hub's Editor-at-Large. He is also a university lecturer at the University of Toronto and Carleton University, as well…
