Amid continuous warnings about looming shortages of supply of critical minerals, the International Energy Agency (IEA) has grown more optimistic about the ability of the industry to meet the expected surge in demand.
Global investments in key energy transition minerals have soared in recent years, and the market has doubled, driven by the rise of electric vehicles (EVs) adoption and a surge in renewable energy capacity installations, the IEA said in its first-ever annual Critical Minerals Market Review this week.
Record levels of spending on mineral deposit development and resource exploration could ease the expected shortages in key battery minerals if projects go as planned by 2030, the IEA says.
“At a pivotal moment for clean energy transitions worldwide, we are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals,” IEA Executive Director Fatih Birol said in a statement.
Global investment in critical minerals surged by 30% last year, following a 20% jump in 2021, the agency’s report found. The market size of key energy transition minerals doubled over the past five years, reaching $320 billion in 2022, pushed up by rising demand and high prices. The market is set to further grow rapidly and move to the center stage of the mining industry, the IEA said.
Last year, investment in lithium development soared by 50%, followed by copper and nickel. Exploration spending jumped by 20%, led by record growth in lithium exploration, especially in hard-rock lithium plays in Canada and Australia.
“A host of newly announced projects indicate that supply is catching up with countries’ clean energy ambitions, but the adequacy of future supply is far from assured,” the IEA said in the report.
“This has reduced the potential mismatch between demand and anticipated supply in 2030, although meeting the requirements in the NZE Scenario still requires further projects to come through.”
However, the IEA acknowledges two key challenges in the critical minerals market—limited sustainability in production and processing and limited diversification of supply.
The share of the top three producers in 2022 either remained unchanged or has increased further, especially for nickel and cobalt, compared with three years ago. China, the Democratic Republic of Congo, and Indonesia continue to dominate a large part of the critical raw material supply, while China is a dominant player in refining operations. For example, Congo has maintained its strong position as the leading cobalt producer, accounting for over 70% of global production in 2022, while China continues to maintain a stronghold in refined product supplies, accounting for more than 75% of refined cobalt output in 2022, the IEA noted.
Most of the planned projects are also in several countries, with China holding half of planned lithium chemical plants and Indonesia representing nearly 90% of planned nickel refining facilities.
“Many resource-holding nations are seeking positions further up the value chain while many consuming countries want to diversify their source of refined metal supplies,” the agency said.
“However, the world has not yet successfully connected the dots to build diversified midstream supply chains.”
The recent Chinese export restrictions on gallium and germanium show “how relatively niche minerals such as magnesium, high-purity manganese, high-purity phosphorus and silicon may disrupt supply chains due to high reliance on a small group of suppliers,” the IEA noted.
Sustainable supply is also a problem in the energy transition. While the energy generated from renewable power sources is zero-emission, the mining and refining activities in the supply chain for boosting EV, wind, and solar uptake are certainly not.
Environmental indicators are not improving at the same rate as community investments and gender equality, the IEA found in its analysis.
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“Greenhouse gas emissions remain high, with roughly the same amount being emitted per tonne of mineral output every year. Water withdrawals almost doubled from 2018 to 2021,” the report says.
Consumers haven’t shown great consideration for sustainability, either.
“Despite the availability of cleaner production pathways, there are few signs that end users are prioritising them in their sourcing and investment decisions, although some downstream companies have started to give preference to minerals with a lower climate impact,” the IEA notes.
By Tsvetana Paraskova for Oilprice.com
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