Today’s well-supplied market for critical minerals ‘may not be a good guide for future’

17th May 2024 By: Terence Creamer - Creamer Media Editor

Today’s well-supplied market for critical minerals ‘may not be a good guide for future’

Investment in certain minerals, notably copper and lithium, is falling short of what was required for transition to net-zero energy system

A new International Energy Agency (IEA) report describes the sharp decline in critical mineral prices over the past year as a double-edged sword, cautioning that, while it has been a boon for clean energy deployment and affordability, it is a bane for critical mineral investment and diversification.

The ‘Global Critical Minerals Outlook 2024’ highlights that, following two years of dramatic increases, the prices of critical minerals fell steeply in 2023, returning to levels last seen before the pandemic.

“Materials used to make batteries saw particularly significant decreases, with the price of lithium dropping by 75% and the prices of cobalt, nickel and graphite falling by between 30% and 45% – helping drive battery prices 14% lower.”

As a result of falling prices, the market size for key energy transition minerals contracted by 10% to $325-billion in 2023, despite demand growth.

The report shows that investment in critical minerals mining grew by 10% and exploration spending rose by 15%, but was slower than in 2022. In addition, investment in certain minerals, notably copper and lithium, was falling short of what was required for a transition to a net-zero energy system.

Detailed project-by-project analysis in the report 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, the reports states, if projects come through as scheduled.

“Today’s well-supplied market may not be a good guide for the future,” the IEA cautions, with demand for critical minerals set to grow strongly in all IEA scenarios, driven by electric vehicles, wind turbines, solar panels and other clean energy technologies.

“Today’s combined market size of key energy transition minerals is set to more than double to $770-billion by 2040 in a pathway to net zero emissions by mid-century.”

The IEA also notes that announced projects do not change the high geographical concentration of supply, with China projected to retain a very strong position in the refining and processing sector.

The report follows an announcement by US President Joe Biden of a ramp-up in tariffs on Chinese-made electric cars, solar panels, batteries, battery components and parts, and some critical minerals, justified on the basis that American workers were being penalised by anticompetitive and unfair practices from China.

However, several critical minerals where China dominates supply were excluded.

The IEA report suggests that lithium and copper are more exposed to supply and volume risks, whereas graphite, cobalt, rare earths and nickel face more substantial geopolitical risks.

The report also urges a stepping up in recycling efforts 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.”