PAYNE INSTITUTE COMMENTARY SERIES: COMMENTARY

By Rebecca Jackson and Brad Handler

June 17, 2025

As the urgency for the US and OECD to develop critical minerals supply chains grows, the Payne Institute believes that a fundamental underpinning for that effort will be understanding and expanding market mechanisms that convene buyers and sellers and support mineral price discovery. To that end, we introduce a Critical Minerals Markets primer, a 60-slide PowerPoint document detailing the nature of critical minerals transactions and how such transactions may evolve given technology and market growth. The primer can be accessed HERE.

While securing physical supply is paramount, price information is critical for allowing market forces to deliver that supply growth. Mines and processing facilities do not manifest simply as a result of expected and perceived demand. If prices aren’t sufficient, nor anticipated to increase, nor transparent enough, projects don’t get funded (or commercial activity is curtailed) and material will not be extracted or refined.

‘Critical minerals’, while a simple and useful term for many discussions, belies the complexity within individual value chains. Fundamental differences between minerals – from geology to production volumes to the refined outputs and their respective chemical compositions – impact how they trade, and the venues in which trade occurs, as well as supply chain logistics, and the potential for recycling. Furthermore, each mineral is priced along the various stages of development (the value chain), from ore to concentrate to high purity metals or chemicals.

The vast majority of critical minerals transactions take place in a bilateral manner, i.e. two parties contract to buy and sell a mineral product. Yet there are marketplaces with live buyers and sellers helping dozens of critical minerals transact. Volumes of standardized grades (e.g. purities) that are large enough can support exchanges; these can also trade financial derivatives products, with which buyers and sellers can manage (near term) future risk. Such exchanges attract commercial buyers and sellers but are also attractive to financial participants who provide additional liquidity.

Because of this liquidity and hedging functionality, exchanges are often seen as the goal for trading commodities. But it is important to realize many minerals lack – and will continue to lack — adequate market depth or capacity for standardization.

Futures markets are also not a “panacea” for solving market challenges such as price volatility. Booms and busts are integral to commodities markets and exchanges allows for speculation that can, at times, even exacerbate volatility. Nevertheless, their role in price transparency and hedging is very important. If demand for certain minerals grows meaningfully over the next 20 years, it would be reasonable to expect more minerals will be handled on exchange.

For the majority of minerals traded off-exchange, price discovery has improved significantly via the development of price benchmarks published by Price Reporting Agencies (PRAs). PRAs track most of the 50 minerals designated as “critical” by the USGS, publishing multiple prices along the value chain for minerals with larger, mature markets with a broad range of products. Some PRA benchmarks are used in settling futures contracts that are not physically settled. Cash settlement is common in a number of recently launched critical minerals futures contracts such as lithium.

Alongside understanding the markets themselves, it’s instructive to look at other risks that can emerge from the broader landscape. For years, a low-cost, and relatively cooperative international trading environment has been conducive to liquidity. Increasing geopolitical tensions — expressed via export bans, tariffs, and other means — can lead to supply risk, as is the case with gallium, antimony and rare earths currently. They also can drive fragmentation in markets, which creates challenges for global markets that need liquidity in order to be effective.

Governments can intervene in various ways to spur more mining and processing of critical minerals. Such steps can include interventions that support minerals markets. They can step in to support pricing and thereby supported continued supply from non-dominant actors. And they can support market infrastructure, providing capital to markets/exchanges be it for trading, price transparency, or stockpiling/warehousing services. However, as noted above, understanding the nuances among critical minerals value chains and their markets — whether simple bilateral contracts, physical trades made through online platforms, or the machinations of the futures markets — is imperative for understanding how policies might impact supply and demand. What works for one mineral may not be optimal for others.

Finally, technology is a driving force for disruption and innovation. This is particularly apparent in enhancing supply chain transparency. Increasingly, buyers of critical minerals (and base metals) are concerned with characteristics beyond purity or chemical composition and there are efforts underway to allow buyers to put value on mineral provenance and the associated environmental/climate and social/labor conditions with which it was produced. Although this risks fragmenting markets, “green” and other premiums are being tracked by various stakeholders, some working in concert with traditional exchanges. Further, physical markets are also exploring technology-enabled shifts; e.g., new platforms have emerged to digitize supply chain logistics and convene buyers and sellers.

Our goal in this primer is to help stakeholders gain and deepen foundational knowledge that, in turn, can help support policymaking and market decision-making. We don’t claim to have touched upon every aspect of trading nor highlighted every issue, solution, or market viewpoint. However, we hope this document provides useful pointers and establishes a “jumping off point” for further analyses. To this end, we have listed some suggestions for future research at the back of the report. As always, we welcome your feedback!

ABOUT THE AUTHORS

Rebecca Jackson, Payne Institute Affiliated Partner
Rebecca Jackson is an affiliated partner of The Payne Institute for Public Policy. She also works with financial services firms supporting strategy, communications, and research. Previously she was the COO of an investment management firm and prior held various roles at an investment bank. She recently completed a graduate certificate at the J.P. Morgan Center for Commodities & Energy Management at the University of Colorado Denver Business School.

Brad Handler, Payne Institute Program Director, Energy Finance Lab, and Researcher
Brad Handler is a researcher and heads the Payne Institute’s Energy Finance Lab. He is also the Principal and Founder of Energy Transition Research LLC. He has recently had articles published in the Financial Times, Washington Post, Nasdaq.com, Petroleum Economist, Transition Economist, WorldOil, POWER Magazine, The Conversation and The Hill. Brad is a former Wall Street Equity Research Analyst with 20 years’ experience covering the Oilfield Services & Drilling (OFS) sector at firms including Jefferies and Credit Suisse. He has an M.B.A from the Kellogg School of Management at Northwestern University and a B.A. in Economics from Johns Hopkins University.

ABOUT THE PAYNE INSTITUTE

The mission of the Payne Institute at Colorado School of Mines is to provide world-class scientific insights, helping to inform and shape public policy on earth resources, energy, and environment. The Institute was established with an endowment from Jim and Arlene Payne and seeks to link the strong scientific and engineering research and expertise at Mines with issues related to public policy and national security.

The Payne Institute Commentary Series offers independent insights and research on a wide range of topics related to energy, natural resources, and environmental policy. The series accommodates three categories namely: Viewpoints, Essays, and Working Papers.

Visit us at www.payneinstitute.mines.edu

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DISCLAIMER: The opinions, beliefs, and viewpoints expressed in this article are solely those of the author and do not reflect the opinions, beliefs, viewpoints, or official policies of the Payne Institute or the Colorado School of Mines.