Southeast Asia’s Critical Minerals Power Play: Can ASEAN Avoid Choosing Between China and the US?

Southeast Asia is becoming one of the most important battlegrounds in the global critical-minerals economy. But the region’s biggest opportunity may not be choosing between Washington and Beijing—it may be using competition between the two to build more valuable industries at home.

The global race for critical minerals is entering a new phase.

Rare earth elements, nickel, graphite, cobalt, copper and other strategic materials are no longer simply commodities extracted from the ground. They are essential inputs for electric vehicles, batteries, semiconductors, renewable-energy systems, advanced electronics, artificial intelligence infrastructure, aerospace and defence.

That transformation has made mineral supply chains a central issue in economic and national security policy.

China remains deeply embedded in global processing and manufacturing networks, while the United States and its partners are investing heavily in alternative supply chains. For Southeast Asia, this competition creates both geopolitical pressure and an unusual economic opportunity.

Rather than viewing the US-China contest as a forced choice, ASEAN economies can potentially use it to attract capital, technology, processing expertise and manufacturing investment from multiple partners.

The critical question is no longer simply who controls Southeast Asia’s minerals?

It is increasingly:

Who helps Southeast Asia capture the greatest share of the value created from those minerals?

Why Critical Minerals Matter More Than Ever

The strategic importance of critical minerals is being driven by several simultaneous technological trends.

Electric vehicles require large quantities of battery materials and other minerals. Renewable-energy systems depend on metals used in grids, generators, batteries and permanent magnets. Semiconductor and advanced-electronics manufacturing requires materials including gallium, germanium, silicon, indium and rare earth elements.

The International Energy Agency’s Global Critical Minerals Outlook 2026 says demand for several important minerals is expected to continue expanding strongly toward 2040. Demand for nickel, graphite and rare earths is projected to grow substantially, while copper is expected to experience particularly large absolute demand growth because of its role in electricity networks.

The IEA also warns that the concentration problem has not disappeared.

In 2025, the average share of the largest refining country across key energy minerals reached approximately 70%, up from 68% in 2020. Indonesia has become dominant in nickel refining, while China remains the leading refiner for many other critical materials.

That concentration gives Southeast Asia an increasingly important role because the region contains both mineral resources and growing manufacturing capabilities.

Southeast Asia Is Not a Single-Mineral Story

One of the weaknesses of simplistic critical-minerals discussions is treating Southeast Asia as if it were dependent on one commodity.

It is not.

Different countries occupy different positions across the mineral value chain.

Indonesia: The Nickel Giant

Indonesia is the region’s most consequential critical-minerals player because of its enormous nickel industry.

According to the IEA’s Southeast Asia Energy Outlook 2026, Indonesia accounted for approximately 63% of global mined nickel production.

Nickel is particularly important for stainless steel and certain lithium-ion battery chemistries.

But Indonesia’s strategy goes beyond simply exporting ore.

The country has pursued downstream industrialisation policies designed to encourage domestic processing and attract investment in smelting, refining and battery-related manufacturing.

This changes the economics dramatically.

Exporting raw ore captures one layer of the value chain.

Mining, processing, refining, producing battery materials and eventually manufacturing components or finished products can capture substantially more.

Indonesia therefore represents an important test case for whether mineral-rich developing economies can convert geological advantages into industrial capabilities.

Malaysia: A Rare-Earth Processing Hub

Malaysia occupies a different position.

Its importance comes particularly from rare-earth processing.

The IEA’s 2026 critical-minerals assessment identifies Malaysia as one of the countries contributing to diversification in rare-earth refining.

The agency notes that increases in Malaysian production, together with new projects in the United States, helped reduce rare-earth refining concentration between 2023 and 2025.

This is strategically important because diversification is not simply about discovering another mine.

The bigger bottleneck is often what happens after mining.

Ore must be separated, refined and converted into materials suitable for industrial applications.

The difference between a mining economy and an advanced mineral-processing economy can therefore be enormous.

Malaysia’s experience demonstrates why Southeast Asian countries can potentially become important not only as resource suppliers but also as processing locations.

Myanmar and the Rare-Earth Supply Chain

Myanmar also occupies an important position in the regional rare-earth ecosystem.

The IEA’s Southeast Asia Energy Outlook 2026 estimates that Myanmar accounted for just under 20% of global mined rare-earth supply and more than 40% of heavy rare-earth elements.

That makes the country strategically significant despite the region’s broader diversification ambitions.

The supply chain, however, is complex.

A mineral can be mined in one country, transported to another for processing and ultimately incorporated into components manufactured somewhere else.

This interconnected structure means that no single country necessarily controls the entire value chain.

That is precisely where Southeast Asia’s leverage can emerge.

The Philippines and the Nickel Opportunity

The Philippines is another major player in regional nickel supply.

The country already occupies an important position in the global nickel market, while its geographic location places it close to major Asian manufacturing economies.

The strategic challenge is determining how much value remains inside the country.

If a resource-rich country exports primarily unprocessed material, much of the economic value is generated elsewhere.

If it develops refining, precursor materials, battery components and manufacturing capabilities, more of the economic activity can potentially remain domestically.

That is the broader lesson emerging across Southeast Asia.

China Still Has Enormous Supply-Chain Advantages

Any analysis of Southeast Asia’s options must acknowledge the scale of China’s existing position.

According to the U.S. Geological Survey’s 2026 China minerals profile, China accounted for approximately 71% of global mined rare-earth production in 2024.

The USGS also reports that China accounted for around 87% of rare-earth processing.

Those figures illustrate why replacing China’s role cannot happen simply by opening new mines.

Processing technology, equipment, technical expertise, logistics, financing and downstream manufacturing all matter.

The IEA’s Global Critical Minerals Outlook 2026 makes this distinction particularly important: announced mining projects outside dominant producers are growing, but refining and downstream manufacturing capacity remains much more constrained.

In other words:

The world may be able to diversify mines faster than it can diversify processing.

That creates an opportunity for Southeast Asia.

The US Is Trying to Build Alternative Supply Chains

Washington’s interest in Southeast Asia is not limited to obtaining raw materials.

The broader objective is supply-chain resilience.

The United States and its partners have been attempting to develop alternative sources for rare earths, battery materials and other strategic minerals.

The CSIS analysis of rare-earth export restrictions describes the substantial disruption created by China’s 2025 rare-earth restrictions and the subsequent US effort to develop alternative supply chains.

This competition gives Southeast Asian governments more bargaining space.

If Washington wants diversified mineral supplies while Beijing wants continued access to regional resources and manufacturing networks, Southeast Asian governments have an incentive to negotiate around investment, technology transfer, infrastructure and local value creation.

The strategic opportunity therefore extends beyond mining rights.

ASEAN’s Bigger Opportunity: Move Up the Value Chain

ASEAN itself has recognised the importance of developing mineral industries beyond extraction.

The ASEAN Minerals Cooperation Action Plan 2026–2030 explicitly identifies sustainable development of extractive industries and expanded upstream-to-downstream minerals and metals cooperation as regional priorities.

That is significant.

The next stage of Southeast Asia’s mineral strategy could involve building connected regional capabilities:

Mining → Processing → Refining → Components → Manufacturing → Recycling

Instead of every country attempting to build an entire supply chain independently, ASEAN economies could specialise in different stages.

Indonesia, for example, has enormous nickel capabilities.

Malaysia has experience in rare-earth processing and advanced manufacturing.

The Philippines has substantial nickel resources.

Vietnam possesses important rare-earth resources and manufacturing capabilities.

Singapore contributes finance, logistics, services and regional headquarters capabilities.

Thailand has developed automotive manufacturing infrastructure.

This creates the possibility of a regional ecosystem rather than isolated national projects.

The Real US-China Competition Is About Industrial Capacity

The US-China contest is often presented as a geopolitical struggle over who gets access to minerals.

But the deeper competition is about industrial capacity.

A mine alone does not produce an electric vehicle.

A rare-earth deposit alone does not produce a permanent magnet.

Nickel ore alone does not produce a battery.

The value is created through a chain of technological and industrial processes.

That is why the IEA warns that mining projects outside dominant suppliers are advancing faster than refining and downstream manufacturing.

For Southeast Asia, this is perhaps the most important strategic lesson.

Owning the resource is only the beginning.

Owning the processing technology, engineering expertise, manufacturing infrastructure and intellectual property can be considerably more important.

Why Southeast Asia Should Avoid Excessive Dependence on Any Single Partner

Diversification is not necessarily about replacing Chinese investment with American investment.

Nor is it about rejecting Chinese participation.

A more resilient model could involve multiple investment and technology partners.

China can contribute substantial manufacturing capabilities, supply-chain expertise and capital.

The United States can provide technology, financing, market access and strategic partnerships.

Japan and South Korea are already deeply integrated into Asian manufacturing networks.

Australia is a major resource supplier and has growing interest in regional critical-minerals cooperation.

Europe also has an interest in diversifying mineral supply chains.

For Southeast Asian governments, the economic objective can therefore be to encourage competition among potential partners rather than lock the region into a single dependency.

The Environmental Problem Cannot Be Ignored

There is, however, another side to the critical-minerals boom.

Mining and refining can create substantial environmental pressures.

Nickel processing, rare-earth separation and other mineral-intensive industries can require large amounts of energy and water while generating waste and emissions.

The long-term competitiveness of Southeast Asian mineral projects will therefore depend partly on environmental standards.

This is particularly important because major buyers increasingly care about the carbon footprint and traceability of industrial materials.

A country that can provide responsibly produced minerals with reliable environmental certification may eventually have an advantage over a low-cost producer with weak standards.

The region’s industrial strategy therefore has to balance three objectives:

Resource security.

Economic value creation.

Environmental sustainability.

Recycling Could Become Southeast Asia’s Next Strategic Advantage

Mining is not the only route to supply security.

Recycling could eventually reduce dependence on newly extracted minerals.

The IEA estimates that secondary supply could make an increasingly important contribution to mineral markets through 2040.

Battery recycling, magnet recycling and recovery of strategic metals from industrial waste could become increasingly important as the installed base of electric vehicles, batteries, electronics and renewable-energy equipment grows.

Southeast Asia’s expanding manufacturing base could give the region an opportunity to develop recycling industries alongside new mineral-processing projects.

That would create a more circular industrial model.

Instead of:

Mine → export → import finished product

the model could become:

Mine → process → manufacture → use → recycle → reuse

Such a system would potentially strengthen regional supply security while reducing pressure on new extraction.

What Could Southeast Asia Gain?

If Southeast Asian countries successfully move up the critical-minerals value chain, the economic impact could extend far beyond mining revenues.

Potential gains include:

• Higher-value manufacturing
• Skilled industrial employment
• Technology transfer
• Battery and EV production
• Semiconductor-related manufacturing
• Export diversification
• Greater foreign direct investment
• New logistics and infrastructure demand
• Growth in engineering and technical services
• Development of recycling industries
• Greater bargaining power with major economies

The objective should therefore not be to maximise mineral exports.

It should be to maximise the economic value generated per tonne of mineral resource.

The Biggest Risk: Becoming a New Raw-Material Dependency

There is an important paradox.

Southeast Asia could reduce dependence on China’s mineral supply chains while simultaneously becoming overly dependent on foreign companies for extracting its own resources.

That would solve one supply-chain problem while creating another.

A sustainable strategy requires local capabilities.

Governments therefore have an incentive to negotiate investment agreements that encourage:

• Local processing
• Workforce development
• Technology transfer
• Domestic supplier networks
• Research and development
• Environmental monitoring
• Transparent contracts
• Infrastructure investment
• Local manufacturing

The objective is not to prevent foreign participation.

It is to ensure that foreign capital helps create domestic industrial capacity.

Can ASEAN Turn Geopolitical Competition Into Economic Leverage?

The answer depends heavily on execution.

A 2026 analysis from the National University of Singapore’s Lee Kuan Yew School of Public Policy highlights Southeast Asia’s growing importance in critical minerals while examining the challenge of maintaining strategic autonomy amid intensifying US-China competition.

That strategic autonomy does not necessarily mean neutrality in every dispute.

Instead, it can mean preserving the ability to make economic decisions based on national and regional interests.

For ASEAN, that could translate into welcoming investment from multiple countries while avoiding excessive concentration in any single supply chain.

The Next Battle Will Be Over Processing, Not Just Mining

The global critical-minerals race is entering a new stage.

The first phase was about finding and extracting resources.

The second phase is about processing.

The third will increasingly involve advanced materials, components, manufacturing and recycling.

This distinction is crucial for Southeast Asia.

The region already possesses many of the raw ingredients required for a major role in the global mineral economy.

Indonesia has extraordinary nickel production.

Malaysia is strengthening its rare-earth processing position.

The Philippines remains an important nickel supplier.

Myanmar occupies a significant position in heavy rare earths.

Vietnam has substantial rare-earth potential.

Meanwhile, ASEAN’s manufacturing infrastructure connects the region to some of the world’s most important electronics, automotive and technology supply chains.

The question is whether those advantages can be integrated into a higher-value regional industrial strategy.

Southeast Asia’s Strategic Choice Is Bigger Than US vs China

The US-China critical-minerals competition is unlikely to disappear.

If anything, critical minerals are becoming more closely linked to technology policy, national security, industrial policy and the energy transition.

But Southeast Asian economies do not necessarily need to treat the competition as a binary choice.

Their greater opportunity may lie in diversification.

China’s enormous processing and manufacturing capabilities are difficult to replace quickly.

The United States and its partners are investing in alternative supply chains.

Japan, South Korea, Australia and Europe also have strong incentives to secure reliable mineral supplies.

That creates multiple potential sources of capital, technology and market access.

The strategic opportunity for ASEAN is therefore to ask a different question:

What can each partner contribute to Southeast Asia’s transition from mineral supplier to advanced industrial producer?

The answer could determine whether the region merely participates in the next critical-minerals boom—or becomes one of its major beneficiaries.

Bottom Line

Southeast Asia’s critical-minerals advantage is not simply the amount of nickel, rare earths or other resources beneath its soil.

Its real advantage is the combination of resources, manufacturing, logistics, growing energy demand, strategic geography and access to multiple global investment partners.

China’s dominance of processing gives Beijing significant influence, while US-led diversification creates additional demand for alternative supply chains.

For ASEAN economies, the opportunity is to use that competition to build processing capacity, attract technology, develop skilled workforces and establish downstream manufacturing.

The ultimate prize is not becoming the world’s cheapest source of minerals.

It is becoming a region that captures a much larger share of the value created from them.

In the emerging global critical-minerals economy, the countries that control the highest-value stages of the supply chain—not necessarily those that simply extract the most ore—are likely to have the greatest economic leverage.

Sources and Further Reading

• International Energy Agency — Global Critical Minerals Outlook 2026
• International Energy Agency — Global Critical Minerals Outlook 2026: Market Overview
• International Energy Agency — Southeast Asia Energy Outlook 2026
• International Energy Agency — Rare Earth Elements
• U.S. Geological Survey — China Mineral Industry Profile
• ASEAN — Minerals Cooperation Action Plan 2026–2030
• CSIS — Rare Earth Export Restrictions One Year Later
• National University of Singapore — Southeast Asia and Critical Minerals
• FULCRUM — Southeast Asia’s Room for Manoeuvre in Critical Minerals