By Dr Han Phoumin, Senior Energy Economist: The demand for critical minerals is projected to increase significantly, from 7.1 million tons (Mt) in 2020 to 42.3 Mt by 2050. This surge is driven by the global commitment to decarbonise emissions in response to the Intergovernmental Panel on Climate Change's warnings about the severe consequences of climate change. Achieving the climate goals outlined in the Paris Agreement – an international treaty with a legally binding commitment to keep the global temperature rise well below 2°C and to strive for 1.5°C above pre-industrial levels – hinges on how effectively countries manage the energy transition. This transition requires political commitment to implement policies that transform energy infrastructures from business-as-usual to clean, sustainable systems, where clean fuels and renewables play a key role.

However, scaling up clean and renewable technologies requires vast amounts of critical minerals, also known as rare earth elements (REE), which are essential for producing technologies such as wind turbines, battery storage, electric vehicles, electrolysers, smart grids, telecommunications, and semiconductors. These technologies are central to the global transition to clean energy, prompting Southeast Asian nations to secure a long-term, stable supply chain of critical minerals.

Yet, ensuring a stable and sustainable supply chain faces multiple challenges, including geopolitical risks, environmental concerns, and infrastructure limitations. Countries in the Association of Southeast Asian Nations (ASEAN) – including Indonesia, the Philippines, Viet Nam, and Malaysia – are crucial to the global supply of critical minerals. These nations hold significant reserves, production capacities, and processing facilities that support the global economy.

Indonesia, a major producer of nickel, holds about 25% of the world's nickel reserves. In 2020, the country produced 760,000 metric tons of nickel and is focusing on expanding downstream industries such as refining and electric vehicle (EV) battery production. The Philippines, the world's second-largest nickel producer, contributed approximately 280,000 metric tons of nickel in 2021, along with significant quantities of copper, gold, and other critical metals for electronics and renewable energy technologies. Viet Nam has substantial reserves of tungsten and rare earth elements, though production and refinement are still in the early stages. Malaysia plays a key role in rare earth processing, while Thailand, though smaller in the critical minerals sector, has notable tin reserves and a growing electronics manufacturing base.

Despite ASEAN’s mineral abundance, the global critical mineral market is heavily influenced by geopolitical factors, especially the tensions between China and the United States. China controls about 80% of the global rare earth refining market, making ASEAN nations highly dependent on China for REE supply. Environmental concerns also present significant challenges for Southeast Asian nations, given the impact of mining and processing critical minerals

To mitigate these risks, stronger cooperation between developed countries and ASEAN could create more resilient supply chains, reducing vulnerabilities to global disruptions. Utilising trade agreements (including the Regional Comprehensive Economic Partnership, RCEP, and bilateral accords), and investment in mining logistics and port facilities are crucial to ensuring a steady flow of minerals to ASEAN. Additionally, advanced nations’ leadership in sustainable mining practices, including enhanced Environmental, Social, and Governance (ESG) standards, can serve as a model for ASEAN countries, supporting the sustainable extraction and use of critical minerals

To ensure the long-term sustainability of the critical mineral supply chain in Southeast Asia, ASEAN countries may need to implement several key strategic policies:

1. Transparency in Mineral Data: Greater transparency regarding mineral reserves, production data, and trade volumes amongst ASEAN nations would improve planning and reduce risks. Regional initiatives like the ASEAN Economic Community (AEC) could be expanded to facilitate coordination in critical mineral production and trade.
2. Diversification of Export Markets: ASEAN countries should reduce reliance on any single market, particularly China. Strengthening trade relationships with countries such as India and Japan can help create a more diversified export base for critical minerals.
3. Modernising Mining Infrastructure: ASEAN must modernise its mining infrastructure, including port facilities, roads, and refining capabilities. Indonesia’s focus on developing nickel-processing facilities at the Morowali Industrial Park is an example of successful investment in infrastructure. A region-wide effort to expand the infrastructure would prevent bottlenecks and reduce dependence on external suppliers.
4. Strategic Partnerships for Mineral Corridors: ASEAN countries could partner with key global players such as the EU, Japan, and the U.S. to establish strategic mineral corridors that secure the supply of critical materials, reducing risks from China’s dominance in rare earth production.
5. Stricter Environmental Regulations: ASEAN nations should adopt more stringent environmental regulations and sustainability standards in their mining sectors. Indonesia’s new mining laws aimed at promoting responsible practices are a step in the right direction, but stronger enforcement is needed.
6. Strategic Mineral Reserves: ASEAN could consider creating a strategic mineral reserve to buffer against global supply disruptions. This would be especially valuable during times of geopolitical tensions or global market instability.
7. Investment in Mineral Recycling: Increasing investment in mineral recycling, especially from old electronics and EV batteries, would reduce the demand for newly mined minerals. Malaysia, for example, has begun exploring advanced recycling technologies to process rare earths and other critical minerals.

By addressing these strategic areas, ASEAN can strengthen its role in the global critical minerals supply chain, ensuring both long-term sustainability and resilience in the face of geopolitical and environmental challenges.

This opinion piece was written by Dr Han Phoumin, Senior Energy Economist, ERIA, and has been published in The Jakarta Post, The Manila Times, and Borneo Bulletion. Click here to subscribe to the monthly newsletter.

Disclaimer: The views expressed are purely those of the authors and may not in any circumstances be regarded as stating an official position of the Economic Research Institute for ASEAN and East Asia.