Three stories dominated critical minerals markets in mid-2026: a sulphuric acid crisis triggered by the Strait of Hormuz closure, a September 24 summit between Xi Jinping and Donald Trump with rare earth export licences on the agenda, and an IEA report confirming that refining concentration has deepened despite years of government effort. Taken together, they are not three separate problems. They are the same problem viewed from different angles: the supply chain's midstream layer is its most exposed and least protected point.
Introduction
Think of a critical minerals supply chain as a three-stage pipeline: ore comes out of the ground, gets processed into usable intermediates, and then gets manufactured into finished products. Governments and investors have spent years focused on the first stage, counting new mine approvals and celebrating discovery announcements. The IEA's Global Critical Minerals Outlook 2026, published in July, delivers an uncomfortable verdict on that approach: the pipeline is not breaking at the mine. It is breaking in the middle.
Three developments in the past six weeks have each, in their own way, confirmed this diagnosis. A sulphuric acid crisis sparked by the February 2026 closure of the Strait of Hormuz has shut down or curtailed production at nickel refineries in Indonesia, leach pads in Chile, and cobalt processing operations across the DRC. A diplomatic confrontation between Washington and Beijing, now heading toward a September 24 summit, centres not on whether China mines rare earths but on whether it will allow them to be shipped and processed for export. And the IEA's headline finding, that the top three refining nations now control 86% of key mineral processing, up from 82% in 2020, shows that six years of policy effort have not loosened the midstream bottleneck at all. They may have tightened it.
The people who need to understand these dynamics are not limited to mining executives or commodities traders. They include automotive procurement managers deciding whether to lock in long-term supply contracts before November 10, when China's suspension of its October 2025 export control package expires. They include policymakers in Brussels and Ottawa weighing how quickly recycling and domestic refining capacity can be built at commercially viable cost. And they include anyone whose business depends on a supply chain that, as this year has made clear, can be disrupted by a conflict in the Persian Gulf, a decision in Beijing, or a tariff threat in Washington.
When a Waterway Becomes a Reagent Crisis
Sulphuric acid is not a glamorous commodity. It is not traded on major exchanges the way copper or lithium is, and it rarely appears in earnings calls unless something has gone badly wrong. What it is, is indispensable. Mining operations use it in leaching, a process where ore is flooded with acid so that target metals dissolve out of the rock and can be captured. Without acid, the leach pad stops working. Without the leach pad, there is no metal, regardless of how rich the ore body is.
The Strait of Hormuz carries roughly half of the world's seaborne sulphur trade, originating from Saudi Arabia, Iraq, the UAE, and Kuwait. When the Strait closed to commercial dry bulk traffic on February 28, Gulf sulphur loadings fell by 74.5% year on year in March alone. By April, more than 600,000 tonnes of sulphur was stranded on vessels in the Gulf. The shock was immediate and physical: refineries and processing plants that had been operating with one to two months of sulphur inventory suddenly found themselves counting weeks.
China compounded the disruption in April, announcing a full export ban on sulphuric acid through August, replacing a 700,000-tonne annual quota with a complete halt. The country is the world's largest acid exporter, supplying Chile, Indonesia, and Saudi Arabia among others. Removing it from international markets simultaneously with the Hormuz closure produced what Benchmark Mineral Intelligence's Will Talbot called the combination of factors capable of pushing more critical minerals players to cut production or shut down operations entirely.
The price data reflects how quickly physical scarcity transmits into market costs. Benchmark recorded spot acid prices above $380 per tonne in Indonesia and above $440 per tonne in Chile, more than double pre-crisis levels in both markets. In hard-rock lithium processing, sulphuric acid went from roughly 3% of operating costs before the disruption to approximately 11% by May, making it the single largest variable cost component. In Indonesian nickel production via high-pressure acid leaching, sulphur's contribution to total costs rose from around 26% to approximately 42%, and some producers placed up to half of their capacity on care and maintenance. Battery-grade lithium carbonate prices in China rose about 65% in US dollar terms over the same period.
A Reagent Is Not Just a Chemical: It Is a Geopolitical Instrument
What the Hormuz disruption exposed, the IEA's 2026 Outlook had already mapped in structural terms. The report is direct on the point: supply security cannot be reduced to bringing more mines online. A Western nation could successfully mine lithium from its own territory and still depend entirely on Chinese processing infrastructure to convert spodumene concentrate into battery-grade lithium hydroxide. The ore is sovereign. The processing is not.
This is precisely the dynamic that makes China's dual role in the current crisis so significant. Beijing is simultaneously a victim of the sulphur disruption, since Chinese lithium converters process Australian and Zimbabwean spodumene using sulphuric acid, and a contributor to it, since China's own export ban removed the world's largest acid supplier from international markets at the worst possible moment. The IEA notes directly that disrupted sulphur supplies prompted China to curb sulphuric acid exports, linking the Hormuz closure to the export ban in a single causal chain.
The rare earth licensing dispute heading into the September 24 Trump-Xi summit follows the same structural logic. China controls approximately 90% of global rare earth refining and nearly all processing of the heavy rare earths, including dysprosium and terbium, that go into EV motors, power steering systems, and advanced sensors. As I covered in September, the 12-month suspension of China's expanded export controls expires on November 10, creating acute urgency for automotive procurement teams. The summit, now 47 days before that deadline, is the clearest diplomatic opportunity to determine whether the reprieve will be extended, modified, or allowed to lapse.
The specific minerals on the US planning agenda for Xi's visit, yttrium, scandium, neodymium, and indium, are not being contested because Washington disputes China's right to mine them. They are being contested because some Chinese suppliers are declining to ship to US customers, and export licences remain unresolved weeks after commitments made at earlier meetings. The locus of power is not at the mine. It is in the licensing window, the processing facility, and the export terminal.
Allies Are Not Immune: The Ontario Dimension
One of the more revealing subplots in this story involves not China but Canada. Ontario Premier Doug Ford threatened in late August to cut electricity supplies and critical minerals to the United States in response to escalating tariff pressure, telling the Associated Press: "I'll cut them off. You won't get a grain of sand out of Ontario." Canada exported approximately $28.8 billion worth of critical minerals to the United States in 2025, accounting for roughly 57% of Canada's total critical minerals exports. Ontario's Sudbury Basin alone, home to Vale and Glencore operations, is one of the world's largest nickel-producing regions.
Ford's threat illustrates something the IEA's Outlook flags but does not always get sufficient attention: geopolitical risk in supply chains does not require an adversary. Trusted allies, integrated into domestic supply chain planning under frameworks like "Fortress North America," can become sources of supply disruption when trade relations deteriorate. The mechanism is identical to what China demonstrated with rare earths: a government with leverage over a concentrated supply point, under sufficient political pressure, reaches for that lever.
For US policymakers trying to diversify away from Chinese critical mineral exposure, the Ontario situation adds a layer of complexity that bilateral minerals agreements do not resolve. Fifty-five such agreements have been signed globally since 2020, according to the IEA. Refining concentration has increased over the same period. The agreements, whatever their diplomatic value, have not yet translated into physical diversification of processing capacity.
The Investment Paradox at the Heart of the Crisis
The IEA's finding that investment in critical minerals fell by 9% in 2025, the first substantial decline since 2020, sits awkwardly alongside the scale of the commitments that governments have made. The report documents approximately $200 billion in pledged government support and 55 bilateral minerals agreements, yet concentration has deepened, not eased. Understanding why requires looking at where the investment is and is not going.
Mining investment is easier to justify commercially than refining investment. Ore bodies are tangible assets with established valuation frameworks. A new copper refinery outside the dominant processing geography, however, faces costs that are on average 50% higher than incumbent operations across cobalt sulphate, nickel sulphate, graphite, and lithium hydroxide, according to IEA modelling. Against a backdrop of low and volatile commodity prices, that cost differential makes diversified refining projects very difficult to finance on commercial terms. The IEA notes that low prices, not geology, are the primary force locking in China's dominance at the processing stage.
The smelter fee data makes the same point from a different direction. Benchmark copper smelter fees were settled at zero dollars per tonne in 2026, the lowest level ever recorded in annual negotiations, while spot charges have remained negative since 2024. Zinc and lead smelter fees have also turned negative. Smelters are responding by becoming increasingly reliant on by-product revenue streams, which are inherently more volatile. The economics of midstream processing, already fragile, are being further eroded by price dynamics at both ends of the value chain.
There is a significant prize available if diversification can be made to work. The IEA estimates that if lithium, nickel, cobalt, graphite, and rare earths were refined locally in resource-holding regions, with roughly two-thirds of copper production processed within those regions, the economic value generated could increase by nearly 50% from current levels, reaching approximately $220 billion. The gap between that potential and current reality is not primarily a question of geological endowment. It is a question of whether the investment environment can be restructured to make midstream projects outside the dominant processors commercially viable.
What Happens Between Now and November 10
The September 24 summit between Presidents Trump and Xi is likely to produce some form of statement on critical minerals. Expectations for a transformational agreement are low across most analysts surveyed ahead of the meeting. China is simultaneously building alternative commercial corridors and infrastructure partnerships across Eurasia and the Middle East, giving Beijing dual leverage: it can negotiate with Washington while reducing its dependence on Western demand for its mineral exports. That dynamic does not favour large concessions on export licensing.
For supply chain professionals, the most important question coming out of the summit may not be whether the November 10 deadline is extended but whether the underlying licensing process becomes more transparent and predictable. The current situation, where some Chinese suppliers decline to ship to US customers for fear of regulatory repercussions from Beijing, is damaging not just to US manufacturers but to Chinese exporters who have contracted to supply them. Both sides have commercial interests in resolving the licence backlog, even if the broader export control architecture remains contested.
On the sulphuric acid front, the structural responses likely to gain traction regardless of whether the Hormuz disruption resolves quickly include accelerated investment in sulphur storage capacity, renewed commercial interest in acid recovery from pyrite and other domestic sulphide sources, and long-term offtake agreements with North American and Central Asian sulphur producers despite their higher baseline costs. The Kazatomprom uranium production cut of approximately 10% in 2026 is a useful reminder that acid shortages can propagate well beyond the metals directly affected by the initial shock.
Building on my analysis of the Hormuz disruption's cascading effects in "One Strait, Three Crises" in September, the picture that is emerging is one where the supply chain's reagent layer, specifically sulphuric acid availability, is becoming a hard production constraint that policy frameworks have not yet caught up with. The IEA's 2026 Outlook confirms the structural diagnosis. The acid crisis of 2026 has provided the real-world stress test.
Conclusion: The Policy Agenda the IEA Is Actually Describing
The three stories covered in this piece, the acid crisis, the summit diplomacy, and the IEA's refining concentration data, are unified by a single underlying problem: the architecture of modern critical minerals supply chains places the most concentrated risk at the processing stage, where it is hardest to see, hardest to insure against, and hardest to diversify in the short term.
Governments have responded to this challenge primarily with mining-stage interventions: permitting reform, offtake guarantees for new projects, bilateral agreements with resource-holding nations. These are not wrong responses. They are incomplete ones. The IEA's 2026 Outlook is explicit that every pathway to supply security now runs through building refining and downstream manufacturing capacity outside dominant processors, and that reagent availability, specialised equipment, and trained workforce are equally critical bottlenecks alongside physical infrastructure.
The November 10 deadline for China's export control suspension will come and go, and markets will adjust to whatever the outcome is. The Hormuz disruption will eventually ease as damage to Middle Eastern oil refinery infrastructure is repaired and alternative sulphur supply routes are established. What will not resolve on its own is the underlying concentration of midstream processing capacity, which has deepened through every cycle of geopolitical disruption since 2020. That is the policy agenda the IEA is actually describing, and it is considerably harder than any bilateral summit is likely to address in a single meeting.