Billionaire Elon Musk called them the “new oil,” complaining about their “insane” cost. The White House dangled subsidies to whoever could boost supply. European politicians scrambled for a response, also promising financial support for projects. Only a few months ago, the prospect of shortages of elements including cobalt, lithium and a few other metals stoked apprehension as prices of the elements needed to make the batteries crucial for the energy transition climbed.

Not anymore. China has broken the market for these so-called critical minerals.

From their most recent peak in 2022-2023, prices of cobalt and lithium have plunged more than 75% after Chinese miners boosted production to levels that were previously unimaginable. Cobalt, long considered a commodity at risk of perennial shortages, is now so abundant that its price is hovering near a 20-year low.The critical minerals moniker no longer evokes concern about shortfalls. But be careful: Low prices are no guarantee of security of supply. More than ever, China dominates production of cobalt and lithium, reinforcing its enormous influence on the batteries essential for electric vehicles and other gadgets. Worse, prices have fallen so low that non-Chinese miners would struggle to make a profit, reducing the incentive for Western investors to build their own sources. The price crash is another strike against one of the most hyped commodity narratives — that the energy transition to cleaner electricity from fossil fuels makes sky-high metals prices inevitable.

The reality is far more complex. Clearly, the energy transition means a lot more demand for particular commodities as the world is going to need millions of new high-performance batteries. While most metals contend with annual demand growth of 2% to 3%, cobalt and lithium have enjoyed consumption growth of 10% to 20% per year. From the demand side, critical minerals are the envy of the commodities industry. Supply, though, has also expanded at breakneck speeds.

Cobalt is paradigmatic. For many years, Glencore Plc., the London-listed commodity giant, dominated the market. But Chinese companies soon followed it into the Democratic Republic of Congo, home of the world’s largest reserves. There, a Chinese company known today as CMOC Group Ltd. has boosted output beyond what many in the industry thought was possible in such a short timeframe.Annual output in the global cobalt market has reached about 230,000 metric tons, as CMOC has expanded its production to more than 100,000 tons this year from about 15,000 tons five years ago. CMOC has rapidly expanded its massive Tenke Fungurume and Kisanfu mines in southern Democratic Republic of Congo. In the process, the Chinese mining giant, which counts battery maker Contemporary Amperex Technology Co. as one of its shareholders, has become the world’s top cobalt miner, outpacing Glencore.

Why would it take so long to rebalance the market? Shouldn’t production respond quickly to low prices, as in a typical boom-bust commodity cycle? The problem is that cobalt isn’t your typical commodity. Virtually no one digs solely for cobalt; instead, about 98% of the world’s output is a byproduct of copper and nickel mining. Hence, the price that really matters isn’t what cobalt fetches, but rather what copper and nickel do. And both command high enough prices that miners have every incentive to keep digging. Thus, low prices aren’t the cure for cobalt overproduction.

The result has been the collapse in cobalt prices. From the most recent peak of more than $80 per kilogram in mid-2022, it has fallen to about $25 recently, hovering near its lowest level in two decades. In real terms, adjusted by inflation, cobalt is the cheapest it’s been in at least half a century.

The best chance the cobalt market has to rebalance is to patiently wait for demand to catch up with the burst of recent extra supply. It doesn’t help that sales of electric vehicles have disappointed so far this year everywhere except China, reducing demand for batteries.

But low commodity prices will certainly help to give demand an impetus. The episodic price spikes during the last two decades prompted a huge engineering effort to reduce cobalt usage. The money spent in research and development created new battery chemistries such as NMC 811 that lowered the cobalt content in the battery’s cathode to just 10%, down from 20% in earlier batteries known as NMC 622, or even 30% in NMC 523.

At current cobalt prices, R&D dollars are going elsewhere, and the industry isn’t trying to cut the commodity usage. Indeed, the opposite is true, with executives telling me they see signs of the return of higher cobalt content for some battery applications.

The market for lithium has followed a similar pattern, with Chinese companies boosting supply so quickly that they overwhelmed the market. Not only is more of the metal being dug up, Chinese companies are also getting very good at recycling old batteries, creating an extra layer of supply. The result has been the same as with cobalt: The market has cratered. Benchmark lithium prices have fallen to about $11,000 per metric ton, down from the most recent peak of almost $70,000 per ton in early 2023.

As with many other commodities, China inflated a bubble in critical minerals. Its domestic demand for batteries was strong — and its dominance of the supply chain was so large that many outside China were prompted to stockpile cobalt and lithium, spurred on by ominous warnings from US and European policymakers. For a brief period, demand overwhelmed supply.

But what China did, China has also undone. It went all in on boosting supply, and the result has been a mighty crash. But don’t be fooled by the current low prices; while they may not recover anytime soon, China’s absolute dominance of critical minerals pose a clear and persistent danger to the future production of the batteries needed to wean the world off fossil fuels.