Deep-Sea Mining and the U.S.-China Resource Cold War: Navigating Risks and Opportunities in the Critical Minerals Supply Chain

The global race for critical minerals has intensified into a high-stakes geopolitical contest, with the United States and China locked in a strategic battle over deep-sea mining. For investors, this competition presents a paradox: unprecedented opportunities in a sector poised to underpin the energy transition and AI revolution, but also significant risks from regulatory fragmentation, environmental backlash, and geopolitical volatility.

The U.S. Strategy: A Bold Reimagining of Seabed Governance

In April 2025, President Donald Trump's Executive Order 2025-1, Unleashing America's Offshore Critical Minerals and Resources, marked a seismic shift in U.S. policy. By bypassing the International Seabed Authority (ISA) and leveraging the 1980 Deep Seabed Hard Mineral Resources Act (DSHMRA), the administration aims to fast-track U.S. access to polymetallic nodules in the Clarion-Clipperton Zone (CCZ), a 1.7 million-square-mile expanse of international waters rich in cobalt, nickel, and manganese. This move directly challenges China's dominance in the sector, where Beijing holds five of the 31 ISA-issued exploration licenses and controls 90% of global mineral processing.

The U.S. strategy hinges on three pillars:
1. Alliances with Pacific Island Nations: The U.S.-Cook Islands partnership, announced in April 2025, targets the Cook Islands' EEZ—a region with estimated $23.6 billion in nodule resources. This alliance reverses the Cook Islands' earlier alignment with China, which had signed a strategic partnership in February 2025.
2. Domestic Infrastructure Development: The executive order mandates a “seabed-to-metal” supply chain, including grants and DPA financing for processing facilities. However, the U.S. currently lacks the infrastructure to refine nodules at scale, with only one company (The Metals Company, TMC) demonstrating bench-scale success.
3. Regulatory Innovation: By sidestepping the ISA, the U.S. seeks to establish a parallel governance framework, inviting scrutiny from nations like New Zealand and environmental groups. This unilateral approach risks fragmenting global seabed mining norms and escalating tensions with China, which views the ISA as the sole legitimate authority.

The Chinese Counteroffensive: State-Driven Dominance

China's deep-sea mining strategy is characterized by state-backed exploration licenses, technological investment, and partnerships with Pacific island nations. Beijing's five ISA licenses cover vast areas of the CCZ and Indian Ocean, with state-owned enterprises like China Ocean Mineral Resources Development Association (COMRA) leading extraction trials. China's dominance in processing—75% of global refining capacity—gives it leverage to control pricing and supply chains, even as it faces criticism for environmental practices.

The U.S. executive order has prompted a sharp response from Beijing, which has labeled the move a “violation of international law.” China's recent export restrictions on gallium and germanium to the U.S. underscore its ability to weaponize mineral supply chains. For investors, this dynamic highlights the fragility of relying on a single nation for processing and the strategic value of diversifying supply chains.

Investment Risks: Geopolitical, Environmental, and Regulatory

1. Geopolitical Fractures: The U.S. bypassing the ISA risks a “Wild West” scenario where nations unilaterally claim seabed resources, undermining multilateral governance. This could lead to disputes with China, the ISA, and even allies like New Zealand, which suspended budgetary support for the Cook Islands in June 2025.
2. Environmental Backlash: Deep-sea mining's ecological risks—sediment plumes, habitat destruction, and noise pollution—remain poorly understood. Thirty-two countries, including the UK and Germany, have called for a moratorium, and environmental lawsuits could delay projects.
3. Regulatory Uncertainty: The U.S. DSHMRA lacks enforcement mechanisms for environmental standards, while the ISA's 2023 draft regulations (which require environmental baselines and impact assessments) remain unimplemented. This creates a regulatory gray zone for investors.

Opportunities in the Supply Chain: Where to Invest?

Despite the risks, the U.S. push for seabed mining opens several investment avenues:
- Exploration and Technology Firms: Companies like TMC, which submitted the first DSHMRA application, and DeepGreen (now TMC) are positioned to benefit from U.S. government support. However, their financials remain volatile, with TMC reporting a $77 million net loss in its trailing twelve months.
- Processing and Recycling Infrastructure: The U.S. lacks domestic refining capabilities, creating demand for startups and established firms in mineral separation and recycling. The Inflation Reduction Act's tax credits (e.g., 45X for advanced manufacturing) could accelerate this sector.
- Alliance-Driven Projects: The U.S.-India Critical Minerals Mission and U.S.-Saudi Arabia collaborations offer opportunities in joint ventures for exploration and processing.

Strategic Recommendations for Investors

1. Diversify Exposure: Avoid overconcentration in single-country or single-mineral bets. Consider portfolios that include U.S.-backed seabed projects, Indian and Australian land-based mining, and recycling technologies.
2. Prioritize ESG Alignment: Environmental and social governance risks are acute in deep-sea mining. Favor companies with transparent environmental impact assessments and partnerships with NGOs like the Deep Ocean Stewardship Initiative.
3. Monitor Regulatory Shifts: Track the ISA's finalization of seabed mining rules and U.S. legislative updates (e.g., the Critical Materials Future Act of 2025). Regulatory clarity could unlock or constrain value.

Conclusion: A New Era of Resource Geopolitics

The U.S.-China competition over deep-sea mining is reshaping the critical minerals landscape, with profound implications for investors. While the U.S. seeks to disrupt China's dominance through alliances and regulatory innovation, the path is fraught with geopolitical, environmental, and regulatory challenges. For those willing to navigate these complexities, the sector offers high-reward opportunities in a resource-driven future. However, success will require a nuanced understanding of both the strategic and ecological stakes at play.