Critical Minerals Market Review 2023

Demand for critical minerals for clean energy technologies is set to increase rapidly in all IEA scenarios

Since its landmark special report in 2021, the IEA has been updating its projections for future mineral demand based on the latest policy and technology developments. In the Announced Pledges Scenario (APS), demand more than doubles by 2030. In the Net Zero Emissions by 2050 (NZE) Scenario, demand for critical minerals grows by three-and-a-half times to 2030, reaching over 30 million tonnes. EVs and battery storage are the main drivers of demand growth, but there are also major contributions from low-emissions power generation and electricity networks. These results are available through the IEA Critical Minerals Data Explorer, an interactive online tool that allows users to easily access the IEA's projection data under different scenarios and technology trends.

A host of newly announced projects indicate that supply is catching up with countries’ clean energy ambitions, but the adequacy of future supply is far from assured

In some cases, newly announced projects suggest that anticipated supplies in 2030 are approaching the requirements of the APS although deployment levels in the NZE Scenario require further projects to be realised. While encouraging, practical challenges persist. Risks of schedule delays and cost overruns, which have been prevalent in the past, cannot be ignored. There is also an important distinction between technology-grade products and battery-grade products, with the latter generally requiring higher-quality inputs. This means that even with an overall balance of supply and demand, the supply of battery-grade products may still be constrained. Moreover, new mining plays often come with higher production costs, which could push up marginal costs and prices.

Three layers of supply-side challenges need to be addressed to ensure rapid and secure energy transitions

They are i) whether future supplies can keep up with the rapid pace of demand growth in climate-driven scenarios; ii) whether those supplies can come from diversified sources; and iii) whether those volumes can be supplied from clean and responsible sources.

Limited progress has been made in terms of diversifying supply sources in recent years; the situation has even worsened in some cases

Compared with the situation three years ago, the share of the top three producers in 2022 either remains unchanged or has increased further, especially for nickel and cobalt. Our analysis of project pipelines indicates a somewhat improved picture for mining, but the same cannot be said for refining operations where today’s geographical concentration is greater.

The majority of planned projects are developed in incumbent regions, with China holding half of planned lithium chemical plants and Indonesia representing nearly 90% of planned nickel refining facilities. Many resource holding nations are seeking positions further up the value chain while many consuming countries want to diversify their source of refined metal supplies. However, the world has not yet successfully connected the dots to build diversified midstream supply chains.

There has been mixed progress towards improving sustainable and responsible practices

Some companies are stepping up actions to reduce environmental and social harms associated with their activities. Our assessment of the environmental, social and governance (ESG) performance of 20 key companies shows that companies are making headway in community investment, worker safety and gender balance. However, environmental indicators are not improving at the same rate. Greenhouse gas emissions remain high, with roughly the same amount being emitted per tonne of mineral output every year. Water withdrawals almost doubled from 2018 to 2021. There is also a question mark regarding the extent to which sustainability is being seriously considered by consumers. Despite the availability of cleaner production pathways, there are little signs that end users are prioritising them in their sourcing and investment decisions, although some downstream companies have started to give preference to minerals with a lower climate impact.

Critical minerals supply is also a concern for China

As the world’s largest metal refining hub, China heavily relies on imports for large volumes of raw materials, often from a small number of sources. For example, China relies almost entirely on the Democratic Republic of the Congo for mined cobalt. China is therefore seeking ways to diversify its raw material supply portfolio. The country has been actively investing in mining assets in Africa and Latin America, and started investing in overseas refining and downstream facilities, with an aim to secure strategic access to raw materials. Between 2018 and the first half of 2021, Chinese companies invested USD 4.3 billion to acquire lithium assets, twice the amount invested by companies from the United States, Australia and Canada combined during the same period.

An approach to critical mineral security needs to cast its net widely to encompass niche minerals

While the focus has understandably been on battery metals and copper, recent events such as the export curbs on Chinese gallium and germanium in July 2023 have highlighted the significance of a lesser-known group of critical minerals, often characterised by small volumes, but high levels of supply concentration. These illustrate how relatively niche minerals such as magnesium, high-purity manganese, high-purity phosphorus and silicon may disrupt supply chains due to high reliance on a small group of suppliers. High-purity manganese requires a particular attention given the growing trends to adopt manganese-rich chemistries in batteries and the lack of projects to supply high-purity products, especially outside China.

A broad and bold strategy is needed that brings together investment, innovation, recycling, rigorous sustainability standards and well-designed safety nets

To bolster global progress, the IEA will host the first ever international summit on critical minerals on 28 September 2023, bringing together ministers from mineral-producing and -consuming economies as well as industry, investors and civil society to discuss measures for collectively promoting a secure and sustainable supply of critical minerals.