Critical Mineral Shortages: Three Blind Spots Leave Industrial Companies Underestimating Their Exposure – an Analysis of BCG’s New Report

Critical mineral shortages are no longer a distant geopolitical scenario but an operational risk that can stop production lines – yet most industrial companies are looking for it in the wrong place. According to an analysis published by Boston Consulting Group (BCG) on 27 October 2026, the metrics companies routinely rely on – procurement spend, tier-one supplier data and country of origin – hide precisely the dependencies that could do the most damage. The report does more than sound an alarm, though: it shows how an accurate map of exposure can become the first step towards public capital and strategic advantage.

In short: BCG projects that demand for key critical minerals could reach 120–250 percent of forecast supply through 2040, yet companies consistently underestimate their exposure to critical mineral shortages. The cause is three blind spots: overweighting procurement spend, looking only at tier-one suppliers, and assessing risk by where minerals are mined rather than who processes and owns them.

Why are critical mineral shortages underestimated?

BCG’s proprietary supply-demand model projects that demand for key inputs – including rare earths, graphite, copper and lithium – will run at roughly 120 to 250 percent of forecast supply through 2040. The largest source of new demand is batteries and electrification, which together could raise demand for critical minerals twentyfold by 2040. On top of that, the AI build-out is projected to roughly triple demand in its segment, and rising defence spending to quadruple it. This matches what we described in our analysis of the global mineral rush: demand is increasingly driven by the arms industry and data centres, not only by the green transition.

The usual corporate response is to hand the problem to procurement. BCG argues that this will not give leadership the full picture, because the widely used metrics systematically produce three blind spots.

Blind spot one: what is cheap never reaches the risk register

Risk assessments typically start with the bill of materials, which steers attention towards metals that are large in tonnage and procurement value, such as copper and lithium. According to BCG, the more dangerous exposures often lie in what it calls “mosquito minerals”: materials so small by traded value that they never make it onto a risk register, yet so essential that entire high-value chains stop without them.

Rare earths illustrate the imbalance. They account for around 40 percent of the cost of a permanent magnet, but less than one percent of the total value of the electric vehicle that uses it. A fighter jet contains about 20 kilograms of rare earths, worth less in total than the paint on the aircraft – and still the plane does not fly without them. We have previously covered China’s dominance of the magnet rare earth supply chain in detail, based on the IEA’s report.

The list, however, goes well beyond rare earths:

• Gallium: the entire global market is worth less than 350 million dollars a year, with production of only about 900 tonnes. BCG nonetheless estimates that roughly 3.5 trillion dollars of final products depend on it – high-speed logic and power chips, AI GPUs, and 5G and satellite communications components. In many applications there is no substitute, or only one that is technically difficult and slow to qualify.
• Germanium: annual global sales are around 260 million dollars, yet it is essential to electronics and fibre optics. Following Chinese export licensing in 2023, an export ban on the United States in 2024 and a cut-off affecting Japan in early 2026, prices in western markets roughly quadrupled.
• Arsenic: almost no company lists it as a strategic risk, yet in ultra-high-purity form (7N5, or 99.999995 percent) it is indispensable for the gallium arsenide semiconductors used in 5G/6G infrastructure, data-centre optics, radar and defence electronics. The upstream market is only around 50 million dollars; China controls roughly 90 percent of refining, and a single Japanese producer supplies about 60 percent of the world’s ultra-high-purity arsenic – in a highly seismic country, with no credible alternative.

A further twist is that gallium, germanium and arsenic are typically recovered as by-products of other mining and industrial processes. Their supply is therefore set by the market for the host metal, so even a sharp price spike does not reliably bring new production.

Blind spot two: dependency hides deep in the supply chain

Companies usually look for critical minerals in the products and components they buy from direct suppliers. But a company that buys almost no critical minerals directly can still be acutely exposed, because minerals arrive embedded in components: motors, magnets, power modules, lasers and sensors.

BCG goes further: critical minerals are not only in the product but in the production process – in crucibles, sputtering targets, furnace internals, catalysts, dies and the capital equipment itself. The report’s example is the machining of turbine blades, engine blocks and structural aerospace parts, which relies on cutting tools made of tungsten carbide bonded with cobalt. Tungsten mining and refining are heavily concentrated in China, which has tightened export licensing on tungsten products in recent years; cobalt carries its own concentration risk through the Democratic Republic of Congo. A manufacturer can therefore be stopped without ever having bought a gram of tungsten or cobalt – a dependency that appears on no bill of materials.

From a waste management perspective this is particularly relevant: recovering hard metal and tungsten scrap can ease exactly this hidden dependency. It is no coincidence that the EU’s 46 new Strategic Projects selected in October include an investment recovering tungsten and cobalt from hard metal scrap, and another recovering gallium from semiconductor industry waste.

Blind spot three: it is not where the mine is that matters

Companies tend to map their exposure to where minerals are mined. For many materials, however, processing rather than extraction is the bottleneck. According to BCG, China refines roughly 90 percent of rare earths and holds the know-how to turn ore into usable magnets; it also processes 65–70 percent of lithium and cobalt and around 70 percent of graphite. Australia mines lithium but ships more than 90 percent of its spodumene to China for processing.

An even less measured factor is ownership. A map of where assets sit and a map of who owns them can look radically different:

• Cobalt: concentration shows up at the mining stage. The DRC accounts for roughly two thirds of global mined cobalt, and major operations are majority-owned by Chinese companies.
• Nickel: here refining is the critical point. Indonesia hosts close to 70 percent of upstream nickel capacity, while Chinese companies and shareholders account for a majority of Indonesia’s refining capacity.

The practical consequence: moving a supply contract from a Chinese refinery to an Indonesian one may look like diversification on paper, yet leave the company’s geopolitical exposure largely unchanged.

Plenty of public money, very little of it spent

According to BCG, the three blind spots are not only a risk but a missed opportunity. Based on International Energy Agency data, public finance commitments to critical minerals in advanced economies reached around 65 billion dollars in 2025, more than four times the 2023 level. BCG’s mid-2026 review found, however, that flagship instruments are at an early stage of deployment: some countries had spent less than 10 percent of their allocated capital, others nothing at all.

These funds are not free money. They come with reporting obligations, governance rights, localisation requirements and screening, and they cover only about a tenth of the total capital needed through 2040. As catalysts, though, they are designed to draw in private capital – through co-investment, guarantees and above all offtake requirements, which are typically the main eligibility gate. This is where the blind spots bite: a company that does not know its own exposure cannot make a credible offtake commitment, and so cannot access the funds.

The report cites three companies – none of them miners – that have used this logic:

• Siemens Gamesa: the wind turbine maker signed a binding five-year contract with Australia’s Arafura Rare Earths for neodymium and praseodymium from 2029, for production in Cuxhaven. Germany’s economics ministry had linked a possible export credit guarantee to Arafura signing offtake contracts with German companies processing the material domestically – Siemens Gamesa’s deal was structured to meet exactly that condition, securing its own supply while unlocking public financing for the mine.
• Mitsui: the Japanese conglomerate won the right to buy 40 percent of the copper concentrate from the Josemaria deposit in Argentina, jointly owned by BHP and Lundin Mining – not from the owners, but through a tender run by JOGMEC, Japan’s state agency for raw material security. Based on early estimates, that amounts to around 77,000 tonnes of copper a year from about 2030.
• Traxys: the metals trader became a founding procurement partner of Project Vault, a US critical minerals stockpile of around 12 billion dollars combining roughly 2 billion dollars of private capital with a 10 billion dollar loan from the US Export-Import Bank. Traxys has since signed offtake agreements with several mining companies.

The common thread, according to BCG, is that in all three cases the CEO and executive team led the process of identifying the blind spots and reframing the strategy.

Five steps to reduce vulnerability

BCG proposes a portfolio of five moves, escalating in complexity and organisational commitment. All require investment, but beyond resilience they can deliver business value such as pricing power and preferred supplier status.

1. Map exposure across the entire value chain. Break down the mineral content of products to subcomponent and process level, trace it back to the mine, and assess processing concentration, ownership, qualification lead times for replacements and the share of revenue at risk. At one BCG client this approach uncovered around 5 billion dollars of value at risk across more than 15 commodities that had not appeared anywhere in procurement data.
2. Diversify before it is needed. Qualifying alternative suppliers, grades and geographies takes a long time, so it must start early – and focus on chokepoints, not easy swaps.
3. Design out dependence on constrained minerals. Multigrade designs, substitute chemistries (as Tesla did with cobalt-free lithium iron phosphate batteries in some models), or components that can run on either copper or aluminium windings without requalifying the whole product.
4. Recover materials through circular design. The simplest form is a trade-in discount; the most powerful is a closed loop in which ownership of the metal never really transfers – as with precious-metal catalysts in industry, which are leased, reclaimed and re-refined. Done well, a company’s installed base becomes its own “mine”. This is the corporate, contract-based form of urban mining.
5. Secure supply through greater control. Where a mineral is crucial and the earlier steps are not enough: long-term and take-or-pay offtake contracts, strategic inventory, co-investment in public vehicles, minority equity or upstream joint ventures. These bring a new risk – overexposure to market cycles – and this is exactly where public sector partnership matters most.

The report also warns against what does not work. Diversification is the cheapest measure but the most likely to be theatre if it ignores processing and ownership concentration. Buying an upstream supplier is not always the answer: one BCG client walked away from a planned lithium acquisition after due diligence, and in hindsight the price cycle would have forced a substantial write-down. Overinsuring – excess stockpiles and unnecessary offtake contracts – is a real cost of capital, not a safe default.

Where to start

Companies do not need to apply all five measures, nor start with the first. BCG suggests three criteria for setting priorities:

• Is the concern cost or availability? If a material is physically available but its price swings, simpler measures may suffice – such as flexibility between copper and aluminium windings. If it is cheap but has no substitute, as with rare earth magnets or ultra-high-purity arsenic, a shortage can stop production, and circular or control-based measures are needed.
• How long does qualifying a new supplier take? A material that is widely available in principle but takes three years to requalify behaves operationally just like a scarce one. Titanium is a good example: not scarce in itself, but aerospace qualification rules out quick supplier switches.
• Does the move actually reduce measured concentration? Most programmes fail at diversification: if every new component supplier traces back to the same upstream chokepoint, that is motion, not risk reduction.

What this means for waste management and for Hungary

BCG’s analysis is addressed primarily to CEOs, but it carries a clear message for the waste sector: the fourth step, circular material recovery, has become part of manufacturers’ supply security strategy. The EU’s Critical Raw Materials Act expects at least 25 percent of annual EU consumption to come from recycling by 2030 – but for that, recovered material must find processing capacity close to home.

Hungary is in a contradictory position here. As battery manufacturing ramps up, production scrap and the resulting black mass are growing fast, yet this material is typically exported for further processing, mainly to South Korea – as we showed in our article on the US black mass export restriction. And not a single Hungarian investment appears on the EU’s second Strategic Projects list. In BCG’s terms: whoever only shreds is exporting raw material and handing the added value – along with the offtake position that leads to public financing – to someone else.

Mosquito minerals deserve particular attention. Much of the world’s gallium and germanium ends up in discarded electronic devices, where low collection rates mean these metals are lost. Because they occur in small, dispersed quantities, recovering them requires not just technology but skilled workers – the EESC opinion on circular skills identifies exactly this gap as one of the bottlenecks of Europe’s strategic autonomy.

According to Tycho Möncks, a coauthor of the report, the question for leaders is not whether their company is exposed – it is – but whether they intend to live with that exposure or turn it into an advantage. In that decision, waste management is no longer a bystander but a potential partner.

Frequently asked questions about critical mineral shortages

How far could demand outstrip supply in critical mineral shortages?

According to BCG’s model, demand for key inputs – including rare earths, graphite, copper and lithium – could reach roughly 120 to 250 percent of forecast supply through 2040. Batteries and electrification are the largest source of new demand, but the AI build-out and rising defence spending are also driving consumption sharply higher.

What are mosquito minerals?

Mosquito minerals are critical minerals whose markets are so small by traded value that they never reach corporate risk registers, yet entire value chains stop without them. BCG’s example is gallium: its global market is worth under 350 million dollars a year, yet an estimated 3.5 trillion dollars of final products depend on it.

Why is it not enough to look at tier-one suppliers?

Because critical minerals often arrive embedded in components such as motors, magnets, power modules, lasers and sensors, and they are also present in production processes and tools. BCG notes that a shortage of tungsten carbide cutting tools bonded with cobalt can stop a production line even if the company never bought tungsten or cobalt directly.

Why does switching suppliers not always reduce risk?

Because the location of a processing plant and its ownership can differ. According to BCG, Indonesia hosts close to 70 percent of upstream nickel capacity, but Chinese companies and shareholders account for a majority of its refining capacity. Moving from a Chinese to an Indonesian refinery may therefore leave a company’s geopolitical exposure largely unchanged.

Why are companies not tapping public funds for critical minerals?

Mainly because they do not know their own exposure precisely. Advanced economies committed around 65 billion dollars of public finance in 2025, yet some countries had deployed less than 10 percent of it. Offtake requirements are typically the main eligibility gate, and a credible offtake commitment is impossible without an accurate exposure map.

What role does recycling play in reducing the risk?

Recycling is one of BCG’s five recommended steps: through circular design, metal recovered from end-of-life products flows back into production. In the strongest model, ownership of the metal never really transfers, as with leased precious-metal catalysts. Done well, a company’s installed base of products can function as its own mine.

🔗 Official sources and references: 👉

• Boston Consulting Group press release (27 October 2026): Three Blind Spots Leave Industrial Companies Exposed to Critical Mineral Shortages
• Möncks, T., Valluru, K., Nikomarov, M., Temple, A., Vogt, T., Clearkin, P., Bharadwaj, A., Lux, T.: Why Critical Mineral Shortages Are a CEO Issue, Boston Consulting Group, 27 October 2026.

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