Demand for Critical Minerals Soaring, Driven by Energy Industry
Demand for the critical minerals key to a future centered around low and zero-emission technologies is surging, according to the International Energy Agency. The energy industry’s ever-growing needs are seen as a key driver.
In a new report published Tuesday, the Paris-based organization highlighted significant increases in demand for key minerals. Between 2017 and 2022, there was a “tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel.”
The main factor behind this increase is the “demand from the energy sector,” according to the IEA’s Critical Minerals Market Review.
Investment and Spending
Investment in the development of critical minerals increased by 30% in 2022, following a 20% rise in 2021, the IEA reported. Companies specializing in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel. Notably, Chinese firms nearly doubled their investment spending last year.
Renewable Energy’s Rise
In Dec. 2022, the IEA stated that renewables are on track to overtake coal and become the largest source of electricity generation globally by the middle of this decade. Given the critical role that minerals play in technologies such as wind turbines and electric vehicles (EVs), the demand is significant.
If all planned projects in the critical minerals sector come to fruition, there may be enough supply to meet governments’ climate pledges, according to the IEA. However, challenges remain, including potential project delays and technology-specific shortfalls that leave little room for complacency about supply adequacy.
To limit global warming to 1.5 degrees Celsius, a crucial goal of the Paris Agreement, more projects will be required by the end of this decade, the IEA emphasized. The market size for minerals crucial to the energy transition reached $320 billion in 2022, doubling over the past five years. Start-ups in the critical minerals sector raised a record $1.6 billion last year.
Geopolitical Considerations
The development of sites for mining and processing critical minerals has significant geopolitical implications due to their importance in low and zero-emission technologies. China currently leads in the extraction of graphite and rare earths, as well as lithium processing. However, the country still heavily relies on the Democratic Republic of the Congo for mined cobalt.
The IEA’s report notes limited progress in diversifying supply sources in recent years, and in some cases, the situation has worsened. While there are signs of a somewhat improved picture for mining, refining operations face challenges. For example, China holds half of the planned lithium chemical plants, while Indonesia represents nearly 90% of planned nickel refining facilities.
Sustainability Concerns
The entire critical minerals industry’s sustainability credentials require attention. The IEA highlighted that water withdrawals nearly doubled between 2018 and 2021, and greenhouse gas emissions remain high. “Much more needs to be done to ensure supply chains for critical minerals are secure and sustainable,” said Fatih Birol, the IEA’s executive director.