A new critical minerals strategy for Canada: From lists to leverage

As published on Substack

Canada’s 2022 Critical Minerals Strategy was made for a world that never existed, one in which minerals were a component of industrial strategy rather than a matter of security and trade.

A decade of Chinese market dominance, pandemic supply-chain disruptions, Russia’s invasion of Ukraine, tariffs and blocked chokepoints have fully awoken us to the risks that dependence on concentrated or adversarial sources of essential minerals has on economic and national security. In this new era, Canada’s response must not be to replicate the state-directed industrial policies of our competitors. The opportunity now is bigger: as the commodity cycle turns upward and geopolitical competition intensifies, Canada should use its extraordinary mineral endowment—and the globally competitive mining industry built around it—to attract investment, expand supply, strengthen allied supply chains and generate prosperity at home.

As the Government of Canada seeks input on updating its Critical Minerals Strategy, here are some ideas to address both the economic opportunity and the security risk.

How Minerals Became Critical

Although the global commodities trade is always political, minerals recently became “critical” – a matter of national and economic security worthy of dedicated policy – following China’s weaponization of its rare earths dominance in a trade dispute with Japan in 2010. Such concerns intensified after the COVID-19 pandemic, when the vulnerabilities in our supply chains were exposed; and after the 2022 Russian invasion of Ukraine, when dependence on adversaries for essential raw materials looked unacceptably risky.

Like many western nations, Canada subsequently put out a Critical Minerals Strategy in 2022. Reading it today feels like peeking into a time capsule. The strategy was primarily concerned with responsibly developing “domestic and global value chains for the green and digital economy.” The emphasis of the document, the meat on the bone, was about boosting supply of six minerals – lithium, graphite, rare earths, nickel, cobalt and copper – for a Canadian EV battery ecosystem (it must be said: an Ontario and Quebec ecosystem), paired with a laundry list of 31 critical minerals with little in the way of coherent policy objectives.

While not wholly unsound, the 2022 Strategy’s focus was narrow; even parochial.

The world, and Canada’s place in it, has changed, and so therefore has our critical minerals strategy. Even before the current process to update the Strategy kicked off, it had already evolved to reflect the growing security and trade aspects of Canada’s resource endowment. The broad goal of the Strategy is now correct: to “strategically leverage our resource wealth, capture the economic opportunities in critical minerals, advance economic reconciliation, and protect against threats to our economic and national security, from exploration through to production.”

In the past year or so, the federal government has adeptly leveraged Canada’s critical minerals in trade talks, led efforts in the G7 and NATO to secure supply across the value chain, and has invested strategically in Canadian production and processing in minerals including graphite and germanium. Importantly, Canada has acted unilaterally when necessary, a sign that it has become a more confident and ambitious actor in this space, and not simply a supporting player for bigger allies.

A Plan for a Different Cycle

What principles should Canada advance to build on this early success, and ensure we achieve our full potential, with a high level of ambition, in the coming years? How can we be great, rather than merely good?

First, the Strategy should reflect an understanding of where we are in the commodity cycle and the opportunity this represents for Canada.

Much of the policy direction regarding critical minerals in the past five years reflected the realities and constraints of a commodity cycle downswing. Authoritarian adversaries were able to gain market share and bolster market power by making investments counter-cyclically, leveraging state funding when the market around them was starved of private capital. This led many to advocate for replicating such a model: using industrial policy and state funding to compensate for real and perceived market failures.

Canada shouldn’t respond to a rise in state capitalism simply by becoming a state capitalist itself, but in mid-2026, it is clear that it doesn’t need to. We have finally moved into the upswing phase of the commodity cycle, as evidenced by a meaningful increase in commodity prices and a rotation of money into energy, mining and industrial stocks and funds. As a result, some of the constraints to solving problems of supply can now be resolved naturally, by the invisible hand of the market.

That means, more than ever, that a priority of the Strategy should be to ensure Canada is as competitive as possible in attracting the significant investment that will be made available in this upswing phase, and able to deploy it effectively. Domestic supply constraints or risks that can be resolved simply through improvements to tax and regulatory competitiveness should always be sought before resorting to state interventions. It is better for private capital to be used instead of taxpayer dollars.

There are many specific ways by which provinces and the federal government could improve tax and regulatory competitiveness to attract that investment, but their efficacy will be revealed only through outcomes. To ensure transparency, specificity, and ambition, the Strategy should measure and track gains in a dashboard in the indicators below – perhaps for Canada’s now 34 critical minerals, but most importantly for all mineral and metal products that generate more than $1 billion in annual revenues – and assign growth targets for 2030 and 2035:

• Annual capital expenditure
• Production (by volume and revenues)
• Exports (by volume and revenues)
• Mining labour productivity
• Canadian market share as a % of global total

While the first three are the truest measure of success, in a commodity cycle upswing, and in an inflationary environment, one may expect the first three indicators to go up irrespective of policy improvements. That is why the latter two are so critical: they are truer proxies for global competitiveness.

Measuring the biggest revenue generating-minerals and metal products would be a departure from the current critical minerals list and would assign more political value to gold and metallurgical coal. This is necessary and appropriate. Not only are these products big drivers of wealth, but they provide a foundation to Canada’s mining ecosystem that ultimately benefits other commodities.

Thanks for reading! Subscribe for free to receive new posts.

The indicators above speak to Canada’s economic opportunity in minerals. Defence-critical, or security-vulnerable minerals require a different approach. For many of these – a combination of commodities which have faced export restrictions from competitors or adversaries, and/or which NATO has identified as essential to defence industrial supply chains – the market is not free and the invisible hand is tied. Defence minerals for which Canada has assessed an ability and willingness to lead in bolstering supply chain security include graphite, scandium, antimony, cobalt, gallium, germanium and tungsten. While one or two other minerals may have a case to be added in the coming years, it is appropriate for Canada to concentrate on a limited number of materials in which it can meaningfully improve security of supply for itself and its allies.

Here the appropriate measure is not revenues or productivity, but rather risk and severity of supply disruption, with a goal for the Strategy to reduce risk to an acceptable or manageable level. This entails understanding supply risks across the entire critical minerals value chain, from extraction, to intermediate processing and refining, to advanced manufacturing, to end-use assembly and recycling; and filling gaps in areas where Canada has a comparative advantage.

Reducing risk can come from a combination of:

1. buffers against disruption via stockpiling, strategic reserves or industry-held inventories;
2. demand certainty via offtake agreements, contracts for difference, and procurement;
3. capital mobilization via grants, loans, loan guarantees, equity, export finance and tax credits;
4. supply boosters via enabling infrastructure development, exploration and refining incentives, R&D supports, labour development supports and permitting efficacy.

Some of these tactics are more interventionist than others. While there may be scenarios where tools such as equity, contracts for difference or stockpiling are necessary, they should be considered as a last, rather than first, resort.

The Market is Canada’s Strength, Not its Weakness

Ultimately, Canada’s Critical Minerals Strategy should seek to enhance the capabilities of its mining sector, not replace them. It must adopt an industry-led, government-enabled approach.

Sometimes Canada’s adherence to free market principles has been viewed as a weakness, or inadequacy, especially when compared to the aggressive policies of some competitors.

It is not.

While there are a few specific instances where government intervention will be required to satisfy legitimate national security and public interest requirements, Canada’s commitment to free markets, free trade, and rule of law is an enormous advantage in attracting capital, bolstering alliances, and improving the security and prosperity of its citizens.

Furthermore, Canada can gain from this geopolitical era and commodity cycle not only from producing and processing more critical minerals domestically, but by positioning our exploration, development, extraction, finance, engineering and service sectors as preferred suppliers globally.

Canada’s world-leading mining businesses are a strategic national asset. Canadians will continue to benefit from efforts that enhance their competitiveness and increase their opportunities in critical minerals development, at home and abroad.