Artificial intelligence is emerging as a significant second driver of AI critical minerals demand, adding data centre construction, grid upgrades and battery storage requirements on top of the electric vehicle and renewable energy growth that has dominated supply chain forecasts since 2020.
The IEA’s Global Critical Minerals Outlook 2025 recorded lithium demand rising nearly 30% in 2024, with nickel, cobalt, graphite and rare earth demand each growing 6–8%, driven primarily by clean energy applications. Analysts now expect AI infrastructure to compound that demand materially through the late 2020s as hyperscale data centre buildouts accelerate.
How AI Amplifies Critical Minerals Demand
Data centres are metal-intensive assets. Each facility requires substantial copper for power distribution and cooling infrastructure, alongside battery storage systems — drawing on lithium and graphite supply chains — to manage grid reliability and peak loads. As AI model training and inference workloads scale, the infrastructure requirements scale with them.
The compounding dynamic is material. Grid upgrades required to power new data centre clusters add copper demand independent of EV charging infrastructure. Battery storage deployments, increasingly necessary to manage grid stability as renewable penetration rises, draw on the same lithium and graphite supply chains serving the EV sector. AI does not replace the energy transition demand story — it runs alongside it, placing a second structural load on supply chains already operating under pressure.
The IEA’s base-case Stated Policies Scenario forecasts lithium demand growing roughly five-fold by 2040, with graphite and nickel demand doubling and copper demand rising approximately 30%. Those projections were modelled on clean energy assumptions. AI infrastructure adds a demand layer that earlier scenarios did not fully capture.
Supply Chains Were Not Built for This Scale
China controls approximately two-thirds of global nickel refining capacity, close to 60% of lithium refining, roughly 70% of cobalt refining, and most rare earth separation capacity. That concentration has made governments increasingly uncomfortable — and increasingly active.
Since 2023, China has introduced export controls on natural and synthetic graphite, gallium, germanium and other dual-use materials, alongside restrictions on advanced lithium-ion battery technologies and key manufacturing equipment. The direction of travel is clear: critical minerals are instruments of geopolitical leverage as much as they are tradeable commodities.
Tariffs and Export Controls Are Redirecting Capital
Washington has raised tariffs on Chinese electric vehicles, lithium-ion batteries and processed minerals, imposed anti-dumping duties on Chinese graphite, and formally identified import reliance on critical minerals as a national security risk. The Trump administration has flagged potential action under Section 232, including minimum import prices and targeted tariffs aimed at non-allied suppliers.
Europe’s Critical Raw Materials Act is setting binding domestic targets for extraction, processing and recycling, with explicit limits on reliance on any single foreign supplier. These policy shifts are redirecting capital toward allied jurisdictions with stable regulatory frameworks — principally Australia, Canada, Chile and Peru — and accelerating investment in processing and refining capacity outside China.
Australia’s Position in the Emerging Supply Chain
Australia has moved deliberately to capitalise on this realignment. The Australian Government’s Critical Minerals Strategy 2023–2030 targets upstream processing and refining rather than raw ore export, backed by a $4 billion Critical Minerals Facility providing concessional financing to miners and processors.
The 2025 US-Australia Framework for Securing the Supply of Mining and Processing of Critical Minerals and Rare Earths formalises supply chain integration between the two countries, providing demand-side signals for Australian project developers. Similar frameworks are in development with Japan, South Korea and EU member states. Australia’s role in global critical minerals supply chains is shifting from primary supplier to strategic processing partner — a distinction that matters to the governments and offtake buyers now writing the contracts.
Price Volatility Does Not Invalidate the Structural Case
Lithium carbonate prices fell below $10,000 per tonne in early 2025 — their lowest level in four years — following a supply surge from China and South America that overwhelmed near-term demand growth. Multiple project deferrals and production cuts followed. Prices have since recovered materially, with inventory drawdowns and accelerating battery storage deployments supporting a medium-term deficit narrative among analysts.
The lesson from lithium’s 2023–25 cycle applies across the sector. Cobalt and nickel have faced oversupply and substitution risk; copper has rallied on grid expansion and data centre demand expectations. These are not a single trade — they are distinct markets, each with its own cost curve, technology exposure and capital cycle. The AI and energy transition demand story is structural. The price path to get there will not be linear.
This article is for informational purposes only and does not constitute investment advice. Prices are subject to change without notice.
What is driving AI critical minerals demand in 2026?
Two forces are converging: the energy transition continues to drive demand for lithium, cobalt, nickel, graphite and rare earths through EV and battery storage growth, while AI infrastructure buildouts are adding a second demand layer via data centre construction, grid upgrades and backup power systems — all of which are copper and battery-material intensive.
Which critical minerals benefit most from AI data centre expansion?
Copper is the most direct beneficiary, required in large volumes for power distribution and cooling in data centres. Lithium and graphite benefit through battery storage deployments needed for grid reliability. Rare earths are relevant for the motors and generators underpinning grid infrastructure.
How does China’s dominance in critical minerals refining affect supply chains?
China controls approximately 60–70% of refining capacity for lithium, cobalt and nickel, and most rare earth separation globally. Export controls introduced since 2023 on graphite, gallium and germanium have demonstrated that this concentration carries geopolitical risk, accelerating investment in alternative processing capacity in Australia, Canada and Europe.
What is the IEA forecast for critical minerals demand to 2040?
The IEA’s Global Critical Minerals Outlook 2025 base-case scenario projects lithium demand growing roughly five-fold by 2040, with graphite and nickel demand doubling and copper demand rising approximately 30%, driven primarily by clean energy applications.
Which countries are attracting critical minerals investment as an alternative to China?
Australia, Canada, Chile and Peru are the primary beneficiaries of supply chain diversification capital. Australia in particular has formalised supply chain partnerships with the US, Japan, South Korea and EU, backed by $4 billion in government financing through its Critical Minerals Facility.
How does tariff policy affect critical minerals supply chains in 2026?
US tariffs on Chinese EVs, lithium-ion batteries and processed minerals, combined with anti-dumping duties on graphite, are raising the cost of China-sourced supply and incentivising procurement from allied-nation producers. Europe’s Critical Raw Materials Act adds binding domestic sourcing targets, further redirecting investment away from single-source dependency on China.
