The world is grappling with a shortage of the minerals essential for producing electric vehicles, wind turbines, solar panels, and other clean energy technologies needed to reduce reliance on fossil fuels.
According to a report by the International Energy Agency (IEA) published on Friday, significant price drops for lithium, cobalt, nickel, and graphite last year were “good news for consumers” but discouraged investment in mining these critical minerals.
The report indicates that by 2035, the world is on track to meet only 70% of global copper demand and 50% of lithium demand.
“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 Fatih Birol, the IEA’s executive director.
Investment in critical minerals mining grew by 10% last year, a rate the agency considers “healthy, but slower than in 2022.”
The IEA forecasts that investors will need to invest $800 billion in mining projects between now and 2040 to limit the rise in global temperatures to 1.5 degrees Celsius above pre-industrial levels. Prices for some critical minerals have returned to their lower pre-pandemic levels, with those needed for batteries dropping particularly sharply.
The price declines were due to a “strong increase” in supply that outpaced demand growth over the past two years, according to the IEA. However, it cautions that “today’s well-supplied market may not be a good guide for the future, as demand for critical minerals continues to rise.”
For instance, demand for graphite is projected to quadruple by 2040 if global efforts to limit warming to 1.5 degrees are implemented.
In 2023, lithium prices fell by 75%, while cobalt, nickel, and graphite prices dropped between 30% and 45%. These declines contributed to a 14% decrease in battery prices, the IEA noted.
Concentration Risks
The IEA warned that the concentration of critical mineral production in a few countries increases the risk of shortages. It projects that by 2030, up to 75% of the growth in lithium, nickel, cobalt, and rare earth elements supply will come from just a few countries. For the types of graphite used in batteries, nearly 95% of supply growth will likely come from China.
“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,” the agency said.
“High market concentration means there is a risk of significant shortfalls in supply if, for any reason, supply from the largest producing country is interrupted.”
Scientists consider a warming of 1.5 degrees a critical threshold, beyond which extreme heat, floods, droughts, wildfires, and food and water shortages would have catastrophic consequences.
