A country can have the workers, infrastructure and money to build a modern battery factory and still face one serious problem. Without a dependable supply of lithium, graphite and other essential materials, its production lines remain vulnerable to shortages and international trade disputes.
Manufacturers are responding by reconsidering where they build their next facilities. Access to critical minerals has become a major factor in industrial investment, alongside electricity costs, transportation networks and access to customers.
The International Energy Agency (IEA) reported in its Global Critical Minerals Outlook 2026 that mineral supply security is now central to discussions about manufacturing, energy and national economic security.
Demand is expanding across electric vehicles, electricity networks and advanced technologies, yet processing capacity remains concentrated in a small number of countries.
Governments are spending money to change that situation. Mining nations want more factories processing their resources locally, and major industrial economies want alternatives to imported materials. For businesses deciding where to invest, the location of the next refinery or processing facility can be as important as the location of a new assembly plant.
Critical Minerals Are Influencing Factory Locations
Critical minerals are materials considered essential to important industries and vulnerable to supply disruptions. Their uses extend across transportation, electronics, renewable energy equipment and defense manufacturing.
Lithium and graphite are major battery materials. Copper carries electricity through industrial equipment and power networks, and rare earth elements are used in powerful permanent magnets found in electric motors and other technologies.
A factory assembling electric vehicles needs more than a steady delivery of finished batteries. Battery manufacturers also depend on processors producing materials that meet demanding chemical and technical specifications.
Mineral extraction and processing are separate activities. A country might mine lithium but send it overseas for refining before manufacturers can use it in battery production. Each international shipment adds transportation costs, delivery times and exposure to trade restrictions.
According to the IEA, global demand for critical minerals is expected to nearly double by 2040 under its Stated Policies Scenario. Lithium demand is projected to rise more than threefold.
Companies planning facilities that will operate for decades have to consider the expected availability of raw materials throughout the life of their investment. A low construction cost is less attractive if the factory depends on a supply chain exposed to repeated interruptions.
Processing Capacity Can Be More Important Than Nearby Mines
Having a mineral deposit nearby does not guarantee that a manufacturing location will be competitive. The material still needs to be extracted, transported and processed into a usable form.
A lithium deposit, for example, does not automatically support a nearby battery factory. Investors also need suitable refining technology, reliable electricity, water supplies and customers prepared to purchase the processed material.
Factories producing finished components may therefore locate near established processing centers rather than directly beside mines. In other cases, governments encourage companies to develop mining, refining and manufacturing facilities within the same industrial region.
China Remains Central to Global Mineral Processing
China built extensive mineral processing and manufacturing capacity long before many governments began treating critical minerals as a national security priority.
Its industrial network connects processors with battery component manufacturers, equipment suppliers and major electronics producers. Building an equivalent network elsewhere requires investment across several industries, not merely the construction of individual factories.
The latest 2026 assessment of mineral supply risks found that refining remains highly concentrated. During the preceding two years, China and Indonesia dominated additional refining output for several important energy minerals. Investment in critical mineral production also declined by 9% in 2025.
Concentrated production presents a serious problem for manufacturers elsewhere. A restriction affecting one processing market can interrupt deliveries to factories thousands of miles away, even when the factories themselves operate without problems.
Export controls add another layer of uncertainty. Industrial companies must consider access to processing technology and finished materials, along with the availability of raw ore.
Building more processing capacity outside China could reduce exposure to individual suppliers. However, competing facilities still need enough customers, skilled workers and affordable energy to remain financially sustainable.
Countries Are Taking Different Routes to Attract Investment
Indonesia Is Keeping More Nickel Processing at Home
Indonesia provides one of the clearest examples of mineral policy influencing industrial geography.
The country has substantial nickel resources, which are important for stainless steel and certain electric vehicle batteries. Rather than continuing to export unprocessed ore, Indonesia introduced restrictions intended to encourage investment in domestic processing.
Under its nickel ore export policy, Indonesia prohibited nickel ore exports from January 2020. Companies seeking access to Indonesian nickel consequently had a commercial incentive to establish or support processing operations inside the country.
For Indonesia, local processing creates opportunities to retain more industrial activity associated with its natural resources. Refining facilities also provide a foundation for related manufacturing, although attracting additional battery production requires separate investment and reliable customers.
Nickel processing comes with environmental costs. Some facilities require substantial energy and water, and mining expansion can damage forests and surrounding communities. Industrial growth depends partly on how effectively authorities and operators manage those effects.
Europe Is Supporting Mining, Processing and Recycling
European manufacturers have extensive experience producing vehicles and sophisticated machinery, but many essential industrial materials arrive from outside the region.
The European Union is attempting to reduce exposure to concentrated imports through its Critical Raw Materials Act.
The legislation establishes 2030 benchmarks for domestic capacity covering at least 10% of annual strategic raw material needs through extraction, 40% through processing and 25% through recycling.
Another benchmark aims to prevent any single country outside the EU from supplying more than 65% of annual EU consumption of an individual strategic raw material at a relevant processing stage.
The policy is influencing which mineral projects receive strategic recognition and support. On October 9, 2026, the European Commission approved another group of projects, bringing its designated strategic projects to 106.
The projects cover multiple activities, including extraction, processing and recycling. Their development could help connect European mineral production with existing automotive and industrial manufacturing centers.
Strategic designation does not mean every facility is already operational. Construction still depends on financing, permits, infrastructure and successful commercial development.
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The United States Is Expanding Domestic Processing
The United States is also directing public funding toward mineral processing, battery manufacturing and recycling.
In August 2026, the US Department of Energy announced $500 million for seven selected projects intended to expand domestic capacity in those industries.
Domestic processing offers manufacturers another potential source of materials without relying entirely on overseas refining. It can also support industrial development in regions with suitable transport infrastructure, available land and established manufacturing workers.
However, mining and processing facilities take time to develop. Public funding does not eliminate technical difficulties, construction costs or the need for long-term purchasing agreements.
Australia Wants to Process More of Its Own Minerals
Australia has significant mineral resources, but exporting raw materials does not capture the full commercial value available from processing them.
The Australian government is developing a Critical Minerals Production Tax Incentive that will provide a 10% tax offset on eligible domestic processing expenditure. The incentive is scheduled to apply from July 1, 2027, through June 30, 2040.
By encouraging refining investment, Australia aims to attract activities that traditionally occur closer to major overseas manufacturing centers.
Processing facilities could strengthen domestic industrial capabilities and give international manufacturers another source of refined materials. Their commercial success will still depend on energy costs, processing technology and demand for their products.
Factory Supply Chains Need More Than Minerals
Industrial expansion creates demand for equipment and services that rarely receive the same attention as major factory announcements.
New mining operations need vehicles to transport workers and move materials. Processing plants depend on maintenance equipment, replacement components and dependable freight arrangements. Delays involving ordinary machinery can interrupt work even when mineral supplies remain available.
Vehicle Maintenance and Replacement Parts Affect Daily Operations
Remote mining sites and industrial construction projects place heavy demands on transportation fleets. Trucks and service vehicles may operate far from major distribution centers, making an unexpected breakdown expensive and difficult to resolve.
Companies planning operations in remote areas should establish maintenance schedules and identify critical replacement parts before equipment arrives. Purchasing teams also need accurate part numbers, vehicle specifications and reliable estimates of delivery times.
Working with a vehicles genuine parts supplier can help businesses source original replacement components for commercial vehicles and supporting equipment.
For project managers, maintaining a list of essential spare parts and arranging suitable delivery options can reduce the risk of a minor mechanical failure causing a prolonged interruption.
The same planning principle extends to pumps, electrical equipment and industrial machinery. Factories need access to replacement components throughout their operating lives, not only during construction.
Recycling Facilities Are Becoming Part of Industrial Planning
Mining new resources is only one way to supply manufacturers with critical materials. Recycling creates another source by recovering valuable metals and other substances from used batteries, manufacturing scrap and discarded equipment.
Battery manufacturers generate scrap during production. Rather than sending material long distances for treatment, companies can work with recycling operations that recover usable resources closer to their factories.
Recycling can reduce dependence on newly mined materials, although recovery costs and technical limitations vary by material. Facilities must also meet environmental and safety requirements, particularly when handling damaged batteries or hazardous waste.
Location plays a substantial role in recycling economics. A plant close to several battery manufacturers can receive production scrap regularly, but collecting used batteries from consumers creates additional transportation and storage challenges.
European plans for recycling capacity illustrate the industrial interest in recovering materials domestically. In the United States, recycling projects are also part of government efforts to expand mineral supply chains.
Recycling cannot immediately replace mining because growing industries need additional materials before enough products reach the end of their service lives. Over time, recovering minerals from older products could provide an increasingly valuable local supply.
What Manufacturers Should Examine Before Choosing a Location
A new processing or manufacturing facility represents a long-term financial commitment. Mineral availability is important, but a successful location needs several conditions to work together.
- Access to processed materials. Identify the actual facilities capable of supplying materials that meet production specifications, rather than relying only on the presence of nearby mineral deposits.
- Reliable electricity. Mineral processing can consume substantial amounts of power. Electricity prices, network capacity and outage risks can influence operating costs.
- Transportation infrastructure. Ports, rail connections and roads affect the cost and reliability of moving raw materials, equipment and finished products.
- Environmental permits. Processing facilities may need approvals covering emissions, wastewater, chemical handling and waste disposal.
- Qualified workers. Chemical processing, industrial maintenance and automated manufacturing depend on specialized technical skills.
- Long-term purchasing agreements. Investors need credible demand for their products, especially when a new facility requires substantial upfront capital.
- Alternative suppliers. A factory relying on one processor remains vulnerable even when that processor operates nearby.
Manufacturers should also examine the actual conditions attached to government incentives. A grant or tax benefit can reduce initial costs, but energy prices and material deliveries will influence profitability for many years afterward.
Companies also need strategies to reduce business costs without compromising production quality or workforce capabilities.
For investors, a factory with a dependable customer and supply network may present a more convincing business case than a facility offering lower construction costs but uncertain material access.
Beyond permits and infrastructure, manufacturers must also consider workplace safety requirements, including OSHA standards for industrial companies operating in the United States.
Environmental Costs Could Influence Which Projects Move Forward
New mining and processing developments face growing scrutiny over land use, water consumption, pollution and the treatment of nearby communities.
A 2026 investigation into Indonesian nickel supply chains linked mining activity associated with major international battery producers to deforestation on Indigenous lands in Sulawesi. The findings demonstrate how environmental problems at an extraction site can reach manufacturers several stages further along the supply chain.
For companies buying refined materials, knowing the country of origin is not enough to establish responsible sourcing. Buyers may also need information on the mine, processing facilities, environmental controls and the businesses involved in transportation.
Mining projects can provide employment and infrastructure investment, but surrounding communities may face lasting environmental consequences. Delays caused by unresolved land disputes or environmental violations can also damage project finances.
Factory location decisions increasingly require an assessment of environmental and social risks alongside commercial costs. Investors that overlook those risks may discover that apparently inexpensive materials carry expensive consequences.
Where the Next Wave of Industrial Investment Could Go?
Countries with mineral deposits have an opportunity to attract more investment by establishing local processing industries. However, mineral resources alone will not guarantee the arrival of battery plants or other advanced manufacturing facilities.
Regions that combine reliable electricity, functioning transport networks and access to skilled workers are better positioned to support processing operations. Proximity to existing industrial customers can improve the commercial case further.
The global manufacturing map is also influenced by international trade policy. Chinese battery producers are expanding overseas as companies respond to tariffs, market access requirements and attempts to develop regional supply chains.
These investments involve many of the same regulatory, financial and operational challenges associated with global business expansion, particularly when entering unfamiliar markets.
The latest report by Financial Times described accelerating overseas investments by Chinese battery manufacturers, particularly in Europe and Southeast Asia.
New facilities outside China will not automatically eliminate dependence on Chinese equipment, processing expertise or battery components. Some international investments may continue to rely on established suppliers even after final manufacturing moves overseas.
The likely outcome is a more geographically distributed industrial system, with additional processing and manufacturing capacity emerging in several regions. Progress will depend on individual projects reaching commercial production rather than remaining investment announcements.
For governments and manufacturers, the decisive test will be keeping factories supplied after construction is complete. Securing a mineral deposit or announcing a processing plant is only the beginning. Reliable production requires the entire chain, from extraction and refining to transport and finished manufacturing, to operate at a cost customers can sustain.
