Critical Minerals Report (04.12.2026): The Iran War, China’s Chemical Leverage & The Real Supply Chain Constraint

Key Takeaways

• Sulfuric acid shortage stems from Iran conflict disrupting Middle East sulfur supply
• China controls >80% of global ammonium and magnesium sulfate production
• USA Rare Earth's €40 million deal secures European mid‑stream processing capacity
• Western investors target processing assets, not just mineral deposits
• Diversification fails without reliable access to essential processing chemicals

Pulse Analysis

The narrative around critical minerals has long focused on securing deposits and building mines, but the real constraint is emerging upstream in the chemicals that turn raw ore into market‑ready products. Sulfuric acid, derived largely from sulfur by‑products of oil refining, is essential for leaching rare‑earths from ionic clays. Recent disruptions in the Strait of Hormuz have choked sulfur flow, while Beijing’s decision to limit exports of ammonium and magnesium sulfate—key reagents for clay processing—creates a parallel supply shock. This chemical scarcity is reshaping project economics, as developers now factor reagent availability into feasibility studies.

Western policymakers are reacting by moving beyond traditional resource‑access agreements toward integrated supply‑chain investments. The United States and the European Union have announced a joint framework to align trade, financing, and industrial policy, aiming to build parallel processing capacity that is less dependent on Chinese chemicals. A concrete illustration is USA Rare Earth’s €40 million term sheet for a 12.5% stake in Carester SAS, which links U.S. feedstock with European separation facilities and future magnet manufacturing. Such deals target the mid‑stream bottleneck directly, ensuring that critical rare‑earths like dysprosium and terbium can be refined even if chemical inputs remain constrained.

For industry players, the takeaway is clear: diversification strategies must incorporate chemical supply security. Companies may need to invest in alternative reagent production, explore recycling loops, or secure long‑term contracts with non‑Chinese suppliers. Policymakers should consider strategic stockpiles of sulfuric acid and related chemicals, as well as incentives for domestic sulfate manufacturing. Ignoring the chemistry gap could leave the West vulnerable to price spikes and project delays, undermining the broader goal of a resilient, independent critical‑minerals ecosystem.