The Elements of Innovation Discovered
The Elements of Innovation Discovered
Metal Tech News - May 24, 2024
IEA calculates that $800 billion needs to be invested in mining by 2040 to ensure adequate supplies of the minerals critical to the energy transition.
Steep drops in lithium prices in 2023 have discouraged investments in the mining of this battery metal.
China's roughly 93% control over the global supply of battery-grade graphite poses geopolitical risks to global supply chains for this material critical to the energy transition.
IEA is forecasting a significant shortage of copper, a metal that is paramount for the energy transition.
While encouraged by the billions of dollars that has been invested in developing new supplies of the minerals and metals critical to the energy transition, the International Energy Agency (IEA) cautions that the current well-supplied market may not be a good guide for the future of critical minerals.
"The world's appetite for technologies such as solar panels, electric cars and batteries is growing fast – but we cannot satisfy it without reliable and expanding supplies of critical minerals," said International Energy Agency Executive Director Fatih Birol.
In its landmark "The Role of Critical Minerals in Clean Energy Transitions" report published in 2021, IEA urged global governments to take swift and decisive action to address "a looming mismatch between the world's strengthened climate ambitions and the availability of critical minerals."
Government, industry, and investor response to the need for energy transition minerals and metals has been swift. Over the three years since IEA's inaugural critical minerals report, the supply of many of the minerals vital to the manufacturing of electric vehicles, wind turbines, solar panels, and other clean energy technologies has outpaced the rocketing demand.
The surging demand and zealous response has resulted in wild swings in the prices for many of the energy transition minerals in recent years.
Battery materials saw particularly large price volatility over the past three years. Following steep rises in 2021 and 2022, the price of lithium plummeted 75%, and the prices of cobalt, nickel and graphite fell between 30 and 45% in 2023.
While the steep price drops helped drive battery costs 14% lower in 2023, it has also discouraged investment into critical mineral mining and exploration. The IEA, however, warns that major investments in the discovery and development of new energy mineral projects are still needed to meet global climate objectives.
"The recent critical mineral investment boom has been encouraging, and the world is in a better position now than it was a few years ago, when we first flagged this issue in our landmark 2021 report on the subject," said Birol. "But this new IEA analysis highlights that there is still much to do to ensure resilient and diversified supply."
The agency forecasts that the market of key energy transition metals is poised to double to $770 billion by 2040 in order to achieve net-zero emissions goals by mid-century.
In addition to warning that critical mineral supply could fall behind demand if the mining sector lets off the accelerator as the energy transition powers ahead, IEA is worried about the supply and geopolitical risks associated with an overreliance on a handful of producers.
Steep drops in lithium prices in 2023 have discouraged investments in the mining of this battery metal.
"Between now and 2030, some 70-75% of projected supply growth for refined lithium, nickel, cobalt, and rare earth elements comes from today's top three producers," the agency penned in its new report.
These EV and lithium battery materials are already heavily concentrated:
• 85% of the world's refined lithium is produced in China (57%), Chile (15%), and Argentina (13%).
• 71% of the world's refined nickel is produced in Indonesia (44%), China (21%), and Japan (6%).
• 84% of the world's refined cobalt is produced in China (74%), Finland (6%), and Japan (4%).
• 92% of the world's rare earths are produced in China (77%), Malaysia (12%), and Australia (3%).
"These high levels of supply concentration represent a risk for the speed of energy transitions, as it makes supply chains and routes more vulnerable to disruption, whether from extreme weather, trade disputes or geopolitics," IEA penned in its Global Critical Mineral Outlook 2024 report.
The supply and geopolitical risks for lithium-ion battery-grade graphite are even higher due to China's near complete monopoly over the mining and refining of this single largest lithium-ion battery ingredient.
China currently supplies 93% of the global battery-grade graphite supply, and the IEA forecasts that the communist nation will account for more than 95% of the growth of this critical material between now and the end of the decade.
Based on the timelines of projects currently in the development pipeline, supplies of battery-grade graphite available outside of China will only be able to meet about 10% of global demand by 2030.
Considering that graphite is the single largest ingredient in the lithium-ion batteries powering EVs and storing renewable energy, more than 90% control over the production of this material gives China considerable leverage.
China's roughly 93% control over the global supply of battery-grade graphite poses geopolitical risks to global supply chains for this material critical to the energy transition.
The communist nation demonstrated its willingness to leverage that control with the implementation of state-controlled restrictions on exports of graphite late last year.
In addition to potential threats of throttling the availability of graphite outside of China, the nation can use its monopoly to flood the markets and drive down prices. This tactic, which China has previously used to maintain control of rare earth markets, would impact the economics of graphite projects outside of China.
To help level the playing field for companies developing graphite mines and refineries in the U.S., President Biden recently introduced 25% tariffs on natural graphite imported from China starting in 2026.
"Concentration of critical minerals mining and refining capacity in China leaves our supply chains vulnerable and our national security and clean energy goals at risk," the White House penned in a May 14 briefing on broad package of tariffs aimed at countering China's unfair trade practices.
Above and beyond the geopolitical risks associated with overconcentration of supplies of many of the energy minerals in a handful of countries, IEA does not see enough copper or lithium in the pipeline to meet energy transition demands.
Based on the agency's detailed analysis, currently announced mine projects will only supply about 70% of the copper and 50% of the lithium required by 2035 to meet global climate goals.
The projected shortfall of copper is particularly troubling due to this metal being the lynchpin of the energy transition.
"Copper is the only critical mineral present in all of the most important clean energy technologies – EVs, solar PV, wind, and electricity networks – due to its unmatched combination of characteristics: electronic conductivity, longevity, ductility and corrosion resistance," IEA penned in its 2024 critical mineral report. "Therefore, the security of supply of copper is paramount for the energy transition."
IEA is forecasting a significant shortage of copper, a metal that is paramount for the energy transition.
The agency predicts that refined copper demand could climb to as high as 33 million metric tons per year by 2030, which is roughly 27% higher than in 2023.
IEA, however, currently foresees copper mining peaking at 25 million metric tons per year in 2026 and then falling due to aging projects and lower-grade ore.
While the global lithium markets are minute compared to copper, the growth in demand for this battery metal outpaces all others.
IEA forecasts that the demand for lithium will be three times higher in 2030 than it was in 2023 and ten times higher by 2050.
The agency does not see any shifts in battery technologies that substantially change lithium demand.
"Lithium-ion batteries' role in fueling the growth of the EV industry remains unchallenged in the near term," IEA wrote in its report. "Alternative technologies such as sodium-ion batteries and vanadium flow batteries begin to take some shares from lithium-ion batteries in low-range vehicles and storage markets, but they do not materially alter the prospects for lithium demand in climate-driven scenarios."
Lithium is currently in oversupply, which is good news in the near term but could have a negative impact on new projects coming online fast enough to keep pace with rocketing demand due to lower prices discouraging investment in lithium exploration and mining projects.
Overall, IEA estimates that an additional $800 billion needs to be invested in mining between now and 2040 in order to meet global climate ambitions. Without robust recycling and reuse of energy minerals, this already large figure would top $1 trillion.
With more than 16 years of covering mining, Shane is renowned for his insights and and in-depth analysis of mining, mineral exploration and technology metals.
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