Market pressure for minerals used in electric vehicles, wind turbines, solar panels and other clean energy technologies eased in 2023 as supply outpaced rising demand. But a new report from the International Energy Agency finds that major additional investments are still needed to meet the world’s energy and climate goals. The Global Critical Minerals Outlook 2024, published today, updates the first market analysis carried out by the IEA last year and offers new medium- and long-term outlooks for the supply and demand of important minerals for the energy transition, such as lithium, copper, nickel, cobalt, graphite and rare earths.
After two years of sharp increases, prices for critical minerals fell sharply in 2023, returning to levels last seen before the pandemic. Materials used to produce batteries have seen particularly significant declines: the price of lithium has fallen by 75% and that of cobalt, nickel and graphite has fallen by between 30% and 45%, contributing to lower prices of batteries by 14%. With demand growth remaining robust, these declines have mostly been driven by a sharp increase in global supply, which has helped offset sharp price increases in 2021 and 2022.
The report finds that while the reduction in prices of critical minerals over the past year has been good news for consumers and affordability, it has represented a headwind for new investment. In 2023, investment in the extraction of critical minerals grew by 10% and exploration spending increased by 15% – still healthy growth, but slower than in 2022.
The current well-supplied market may not be a good guide to the future: the Outlook finds that demand for critical minerals continues to grow strongly across all IEA scenarios, driven by the deployment of clean energy technologies. The current combined market for minerals key to the energy transition is set to more than double to $770 billion by 2040, on a path to net zero emissions by mid-century.
A detailed analysis of individual projects suggests that announced projects are sufficient to meet only 70% of copper needs and 50% of lithium needs in 2035, in a scenario in which countries around the world meet their targets national climates. Markets for other minerals appear more balanced, if the projects are built as planned. However, the announced projects do not change the high geographic concentration of supply and China is expected to maintain a very strong position in the refining and processing sector.
“Secure and sustainable access to critical minerals is essential for a smooth and affordable clean energy transition. The world’s appetite for technologies like solar panels, electric cars and batteries is growing rapidly, but we cannot satisfy it without reliable supplies and expanding critical minerals,” said IEA Executive Director Fatih Birol. “The recent boom in investment in critical minerals has been encouraging, and the world is in a better position than it was a few years ago, when we first flagged this issue in our landmark 2021 report on the topic. But this new analysis of the ‘IEA highlights that there is still much to be done to ensure a resilient and diversified supply.’
The latest Outlook presents a first-of-its-kind risk assessment for selected energy transition minerals, analyzing four key dimensions: supply risks, geopolitical risks, barriers to responding to supply disruptions and exposure to environmental, social and and governance (ESG) and climate. Lithium and copper are most vulnerable to supply and volume risks, while graphite, cobalt, rare earths and nickel face more substantial geopolitical risks. For graphite in particular, the current project pipeline indicates that available supply outside the dominant player meets only 10% of needs in 2030, making it very difficult to achieve announced diversification goals. Most minerals are exposed to high environmental risks.
Intensifying efforts to recycle, innovate and promote behavioral changes is key to alleviating potential supply strains. Around $800 billion of investment in the mining sector is needed between now and 2040 to be in line with a 1.5°C scenario. Without widespread recycling and reuse, mining capital needs would be a third higher.
The report finds that the sector is making progress on worker safety, gender balance, investment in communities and the use of renewable energy for mining production. However, the same cannot be said for the reduction of waste production, greenhouse gas emissions and water consumption, which suggests a large margin for improvement.
