May 2024 | Despite a decline in the prices of essential minerals crucial for clean energy technologies in 2023, a new report by the International Energy Agency (IEA) underscores the urgent need for increased and diversified investments to achieve global energy and climate targets.
In 2023, the market for minerals used in electric vehicles, wind turbines, solar panels, and other renewable technologies experienced a temporary relief as supply growth exceeded the strong demand. However, the IEA “Global Critical Minerals Outlook 2024” emphasizes that substantial further investments are necessary to fulfill future energy and climate goals.
This report follows the IEA’s initial review from last year and introduces new medium- and long-term forecasts for the supply and demand of vital energy transition minerals like lithium, copper, nickel, cobalt, graphite, and rare earth elements. After two years of significant price increases, 2023 saw a sharp decrease in these minerals’ prices, with lithium dropping by 75% and other materials like cobalt, nickel, and graphite seeing reductions between 30% and 45%.
Despite these lower prices benefiting consumers and enhancing affordability, they pose challenges for new investment in the sector. Investment in critical mineral mining and exploration saw growth in 2023, although at a slower pace compared to 2022.
The current supply situation may not reliably predict future conditions, with the Outlook indicating that demand for these minerals will continue to rise sharply, propelled by clean energy technology deployments. The market value of these essential minerals is expected to more than double to $770 billion by 2040 if a net-zero emissions pathway is pursued.
IEA Warns Current Mineral Projects Inadequate to Meet 2035 Climate Targets
Detailed project-by-project analysis suggests that announced projects are sufficient to meet only 70% of copper and 50% of lithium requirements in 2035 in a scenario in which countries worldwide meet their national climate goals. Markets for other minerals look more balanced – if projects come through as scheduled. However, announced projects do not change the high geographical concentration of supply, and China is projected to retain a very strong position in the refining and processing sector.
“Secure and sustainable access to critical minerals is essential for smooth and affordable clean energy transitions. The world’s appetite for technologies such as solar panels, electric cars and batteries is growing fast – but we cannot satisfy it without reliable and expanding supplies of critical minerals,” said IEA Executive Director Fatih Birol. “The recent critical mineral investment boom has been encouraging, and the world is in a better position now than it was a few years ago, when we first flagged this issue in our landmark 2021 report on the subject. But this new IEA analysis highlights that there is still much to do to ensure resilient and diversified supply.”
Advances in Safety and Renewable Usage, But Environmental Concerns Remain
The latest Outlook features a first-of-its-kind risk assessment for selected energy transition minerals, scrutinising four key dimensions: supply risks, geopolitical risks, barriers to responding to supply disruptions, and exposure to environmental, social and governance (ESG) and climate risks. Lithium and copper are the most vulnerable to supply and volume risks, while graphite, cobalt, rare earths and nickel face more substantial geopolitical risks. For graphite in particular, today’s project pipeline indicates that the available supply outside of the dominant player meets only 10% of the requirements in 2030, making announced diversification goals highly challenging to achieve. Most minerals are exposed to high environmental risks.
Stepping up efforts to recycle, innovate and encourage behavioural change is vital to ease potential strains on supply. Some $800 billion of investment in mining is required between now and 2040 to get on track for a 1.5 °C scenario. Without the strong uptake of recycling and reuse, mining capital requirements would need to be one-third higher.
The report finds that the industry is making progress on worker safety, gender balance, community investment and using renewable energy for mineral production. However, the same cannot be said for reducing waste generation, greenhouse gas emissions and water consumption – suggesting ample scope for improvement.
IEA Updates Critical Minerals Data Explorer to Enhance Industry Insight and Decision-Making
Accompanying the report is an updated version of the IEA’s Critical Minerals Data Explorer, an interactive tool for exploring these projections. This release is part of the IEA’s ongoing efforts to address critical minerals issues, highlighted by a recent summit and the launch of a new Critical Minerals Security Programme.
