Markets Before Mines: Why the U.S. Must Build a Critical Materials Market
A new bipartisan bill the SECURE Minerals Act of 2026, has been proposed to counter China’s manipulation of the critical materials market. But why is such a law needed, and how does it benefit the U.S
China did not gain dominance over lithium prices by accident.
China built its lithium and battery industry by reversing the traditional Western order of development. In the United States and Europe, the usual sequence starts with upstream innovation. Money flows into research, patents are applied for, and products are designed around intellectual property and branding. Manufacturing scale comes later and is often outsourced to protect margins.
China deliberately prioritized scale from the outset
State guided policy, subsidies, low cost financing, and industrial clustering created capacity far beyond what short-term demand required. That scale created a self reinforcing cycle. Large scale production flooded the market with lithium carbonate, cells, and packs. That volume generated enormous amounts of data on performance, defects, yields, and supply chain bottlenecks at levels that could never be achieved at bench or pilot scale.
That data fed rapid engineering iteration. Chemistries, processes, and designs improved from constant factory feedback. Costs fell and efficiency rose. Cost leadership followed, exports grew, and competitors without similar scale fell to the wayside.
The Chinese domestic market, the world’s largest for EVs and energy storage, absorbed a significant share of that supply, but China’s production scale is so large that even this demand could not absorb it all. A meaningful share has to be exported to keep factories running at high utilization and clear the surplus. Exports are not optional. They are structurally necessary to balance this overcapacity.
This is where the financial layer becomes important.
When the Guangzhou Futures Exchange launched its lithium carbonate futures, it faced the problem every new contract faces. A market needs buyers and sellers to function, and a new contract with no trading history, no price reference, and no proven link to the physical material gives companies little reason to participate.
The exchange and regulators however did not wait for activity to appear on its own. They actively recruited companies from across the lithium supply chain to participate. Processors, refiners, and cell manufacturers were encouraged to trade as hedgers, using the contracts to protect themselves from price swings. Their participation created a steady base of real trades that tied the futures price directly to China’s lithium production capacity.