Critical Minerals: Can Resource-Rich Emerging Markets Escape the Raw Ore Trap?

The Structural Barriers Moody's Identifies

Moody's does not present the opportunity as easy or automatic. The report highlights several structural barriers that limit how quickly and easily emerging markets can capture midstream and downstream value:

• Complex, capital-intensive refining processes — extraction and refining is "complex and expensive," and China already dominates global production capacity .
• Years-long lead times — Moody's notes that many countries are "years away" from being able to refine minerals at the same scale domestically .
• Geopolitical and trade tensions — critical minerals have become "economic levers," and while supply chain security is driving policy, it is also raising barriers to entry for new players .
• China's existing stranglehold — Moody's own July 17 "Macro Views" page highlights that Chinese companies retain a critical processing edge . A companion investor report, citing International Energy Agency (IEA) data, notes that China controls between 47% and 87% of global refining capacity across critical mineral supply chains and an estimated 94% of global rare earth magnet manufacturing capacity .

Indonesia's Nickel-Driven Value Chain Ascent

Indonesia is the clearest example of an emerging market moving up the critical minerals value chain — and the one Moody's and related sources point to most prominently as both a model and a warning.

The export ban policy. In January 2020, President Joko Widodo banned raw nickel ore exports, mandating that all nickel be processed domestically before export . This "downstreaming" (hilirisasi) strategy has since been extended to bauxite, with the government identifying 15 priority downstream commodities for development .

The scale of transformation. The results have been dramatic. Nickel pig iron (NPI) smelters grew from just 2 to over 44, with cumulative downstream investment of roughly US$40 billion . Indonesia now accounts for 54% of global NPI production and hosts 74% of the world's NPI smelters . Mined nickel output roughly tripled to approximately 2 million tonnes per year . The export value of nickel rose from US$1.4 billion in 2020 to US$6.8 billion in 2023 . By 2024, processed nickel exports had reached US$34 billion, a tenfold increase .

Continuing momentum. In Q1 2026, mineral downstream investment hit IDR 98 trillion, led by nickel at IDR 41.5 trillion, copper, and bauxite . Indonesia now commands roughly two-thirds of global refined nickel supply .

The key caveat — Chinese control. Independent assessments consistently point to a major problem: the new capacity is overwhelmingly Chinese-owned and controlled. Chinese firms built over 90% of Indonesia's nickel smelters, control approximately 75% of the roughly 8 million tonnes of refining capacity, and 94% of ferronickel export value goes to China . The SOAS case study on Indonesia's nickel boom puts it bluntly: "Downstreaming was designed to build Indonesian industrial capacity. In practice, it built Chinese-controlled capacity in Indonesia" . The Energy Shift Institute's report on Indonesia's nickel value chain concludes the country has achieved "dominance without depth" — it is the world's largest nickel smelter (Tier 3) but has not advanced into Tier 2 fabrication or Tier 1 OEM production .

UNCTAD's Demand Projections: Why Everyone Is Rushing

The demand-side context for the rush to build processing capacity is provided by UNCTAD's June 2026 Global Trade Update on critical minerals. The headline numbers are stark:

• Lithium demand is projected to rise by 353% between 2024 and 2040, driven by EV batteries, energy storage, and grid electrification .
• Graphite demand is projected to rise by 131% over the same period .
• Copper demand is growing sharply, driven by AI data centers, EV charging infrastructure, and renewables .
• Supply is "highly concentrated" in a handful of countries for reserves, mining, and refining, and nearly 100 new export measures have been imposed by governments racing to secure supply chains .

The United Nations itself has called for "fair play" in the global race for critical minerals, noting that resourcerich developing countries are at the centre of emerging value chains but risk being left with the environmental costs and limited benefits .

The IFC-Appian $1 Billion Fund: A Response to the Financing Gap

In October 2025, the International Finance Corporation (IFC), a member of the World Bank Group, and Appian Capital Advisory launched a US$1 billion partnership to accelerate responsible development of critical minerals, metals, and mining-related projects in emerging markets . The IFC anchors the fund with an initial contribution of US$100 million . This is IFC's first dedicated mining vehicle for emerging markets and its first partnership with a private mining equity specialist . The fund is explicitly a response to the global critical minerals shortage and the concentration of supply chains . It exists precisely because private capital alone has been insufficient to bridge the gap in emerging markets.

Persistent Infrastructure and Financing Constraints

The evidence underscores that infrastructure and financing gaps remain binding constraints on the ability of emerging markets to move up the value chain:

• Moody's emphasizes that refining is "complex and expensive" and requires long lead times .
• The IFC-Appian fund was created because private capital alone has not been enough .
• Indonesia's own experience shows that while downstream investment has been massive (roughly US$40 billion), most of it came from Chinese state-linked capital, not international or domestic private finance at scale .
• Many countries with mineral endowments still lack the industrial ecosystem — reliable power grids, skilled labor, and midstream facilities — to process ore domestically. For example, Brazil holds the world's second-largest rare earth deposits but is only beginning to build processing capacity, and the U.S. has already moved to secure offtake influence through the Development Finance Corporation's support for the Serra Verde project .

The Risk of Remaining Locked into Low-Value Extraction

Multiple sources warn that without deliberate industrial policy and sustained investment, resource-rich countries risk remaining stuck at the bottom of the value chain:

• Moody's frames the risk implicitly: the "opportunity to graduate" exists, but China's dominance of refining means most countries still export raw ore and import processed material .
• Independent analysis of Indonesia's nickel boom explicitly warns that the country built Chinese-controlled capacity in Indonesia, not Indonesian-controlled industrial capacity .
• The Energy Shift Institute's report on Indonesia's nickel value chain concludes the country has achieved "dominance without depth" — the world's largest nickel smelter has not advanced into higher-tier fabrication or OEM production .

U.S. and IEA Warnings on Supply Chain Concentration

Moody's July 17 "Macro Views" page notes that the push to secure critical minerals supply chains is accelerating, driven by defense, AI, and renewable energy demand, with countries taking steps to strengthen supply chains . The broader context is that the U.S. and its allies are racing to reduce dependence on Chinese refining via the Minerals Security Partnership and related initiatives, though the specific timing of executive orders or IRA implementation details was not independently sourced in the search results captured.

The IEA's warnings are stark. Data from the IEA, cited in a June 7, 2026 investor report, indicate that China controls between 47% and 87% of global refining capacity across many critical mineral supply chains and is estimated to control approximately 94% of global rare earth magnet manufacturing capacity . JP Morgan's Global Research reinforces this picture, noting that China supplies 91% of refined rare earths and 92% of magnets . The IEA has repeatedly warned that investment in new refining capacity outside China is far below what is needed to meet 2030 and 2050 demand scenarios, creating a structural supply chain concentration risk .

Bottom Line: A Narrow Window

Moody's July 2026 report presents a window of opportunity for resource-rich emerging markets to move up the critical minerals value chain. But it is a narrow window hedged by China's overwhelming control of midstream refining, massive capital requirements, multi-year lead times, and the risk that foreign investment builds capacity without building domestic industrial capability — as Indonesia's nickel story illustrates in real time. The opportunity is real, but it will require deliberate industrial policy, international financing at scale, and a willingness to confront the structural barriers that have kept mineral-rich countries at the bottom of global supply chains for generations.