Demand for critical minerals hits record levels, but supply issues continue

An initial annual market review undertaken by the International Energy Agency (IEA) has found that the demand for critical minerals has hit record levels, but supply issues continue.

Driven by the dramatic growth in renewable energy technologies such as electric vehicles (EVs), wind turbines, solar panels and other technologies key to the clean energy transition, the IEA study found that demand for critical minerals has doubled in size over the past five years.

However, it also identified that the unprecedented demand means that more work needs to be done to ensure there is better access to diversified and sustainable mineral supplies.

Lithium demand triples

The IEA Critical Minerals Market Review identified that from 2017 to 2022, the energy sector was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel.

It also estimated that the market for energy transition minerals hit $470 billion in 2022 and is set for continued rapid growth, moving it increasingly to centre stage for the global mining industry.

The growing demand led to critical mineral development rising by 30% last year, following a 20% increase in 2021. Among the different minerals, lithium saw the sharpest increase in investment, a jump of 50%, followed by copper and nickel.

IEA Executive Director, Fatih Birol, said the immediate success of the clean energy transition will be heavily influenced by the availability of critical minerals.

“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,” Mr Birol said.

“Even so, major challenges remain. Much more needs to be done to ensure supply chains for critical minerals are secure and sustainable.”

Threat to project timing

According to the IEA, if all planned critical mineral projects worldwide are realised, supply could be sufficient to support the national climate pledges announced by governments, according to the IEA’s analysis.

However, the risk of project delays and technology-specific shortfalls means there is little room for complacency about the adequacy of supply. And more projects would in any case be needed by 2030 in a scenario that limits global warming to 1.5°C.

One of the particular areas of concern is diversity of supply as many of the latest projects are being developed in already dominant, critical mineral producing countries.

The maiden study found that the market share of the top three critical mineral producers in 2022 either remained unchanged or increased further, especially for nickel and cobalt.

It was also uncovered that while companies are making headway in community investment, worker safety and gender balance, but at the same time, greenhouse gas emissions remain high, with roughly the same amount emitted per tonne of mineral output every year.

As part of its planned support to improve international collaboration on critical mineral supply issues the IEA is scheduled to hold the first ever international summit on critical minerals and their role in clean energy transitions on 28 September in Paris.

The gathering will bring together government ministers, large mineral producers and consumers, as well as business leaders, investors, heads of international organisations and civil society representatives.