First IEA critical minerals review finds demand soaring but market responding

The International Energy Agency (IEA) has become the latest body to issue an alert over soaring demand for materials seen critical to the energy transition, although the Paris-based entity also saw signs that market forces are providing a response in terms of rising investment.

The IEA’s first annual critical minerals market review, which coincided with the launch of a new online data tool for the sector, presented key indicators such as a tripling in demand for lithium from 2017 to 2022, driven mainly by the energy sector.

The report also highlighted a 70% jump in demand for cobalt, and a 40% rise in demand for nickel, along with a similar picture for many other minerals needed for electric vehicle batteries, wind turbines, solar panels and other technologies.

The IEA said unprecedented growth such as this, driven by climate targets, has been fuelling a sharp rise in investments and stimulating new projects.

The report found that the critical minerals market has doubled in size over the past five years, and suggested that the pipeline could, in theory, be enough to support the required growth by 2030, provided all projects are delivered on time.

IEA annual view of critical minerals market shows soaring demand. Photo: IEA

Investment in developing production of critical minerals topped $40 billion last year, up 30% on 2021, when annual growth was also significant at 20%, the IEA found.

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Among the different minerals, lithium saw the sharpest in increase in investment, a jump of 50%, followed by copper and nickel.

The market for energy transition minerals reached an overall value of $320 billion in 2022 and “is set for continued rapid growth, moving it increasingly to centre stage for the global mining industry”, the IEA report said.

Pivotal moment

“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,” IEA executive director Fatih Birol said.

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

Among the concerns, the IEA pointed to the likelihood of delays to mining projects as a result of factors such as permitting, financing and operational issues.

The agency found that much more needs to be done to ensure diversified and sustainable mineral supplies and to build more resilience into a market that is still highly concentrated both in terms of production and downstream investment.

As with other recent reports, the IEA study flagged the high level of concentration of supply as a cause for concern for minerals such as nickel and cobalt, “with many new project announcements coming from already dominant players”.

Although exploration spending is rising in North America, Australia and other regions, Chinese companies are consolidating their dominant position with regard to accessing materials critical to clean energy after nearly doubling their investment spending in 2022.

This compared to an average increase of 25% for leading Western mining companies, the IEA said.

IEA critical minerals market review for 2023 shows exploration spend increasing. Photo: IEA

Lithium processing is becoming increasingly concentrated in China while 90% of new nickel refineries will be located in Indonesia, led by joint ventures with China, the report showed.

Mixed progress

The IEA said environmental, social and governance (ESG) practices are making “mixed” progress.

“Companies are making headway in community investment, worker safety and gender balance. However, greenhouse gas emissions remain high, with roughly the same amount emitted per tonne of mineral output every year. Water withdrawals almost doubled from 2018 to 2021,” the IEA review stated.

In an attempt to strengthen international dialogue and co-operation on the matter, the IEA said it will host the first ever international summit on critical minerals and their role in clean-energy transitions on 28 September in Paris.

The IEA said it will convene ministers, large mineral producers and consumers as well as business leaders, investors, heads of international organisations and civil society representatives.

* A version of this article first appeared in Upstream’s renewables sister title, Recharge.