As the world embarks on the energy transition, the demand for critical minerals is set to soar, underscoring the importance of ensuring a reliable and diversified supply to support the global shift towards a sustainable future.
In its latest report, the International Energy Agency (IEA) revealed that the combined market value of key energy transition minerals – including copper, lithium, nickel, cobalt, graphite, and rare earth elements – is expected to more than double, reaching a staggering $770 billion by 2040. This significant growth highlights the increasing importance of these critical minerals in supporting the world’s transition to clean energy.
Currently, the aggregate market value of these key energy transition minerals aligns broadly with that of iron ore, standing at around $325 billion. However, the IEA’s analysis shows that by 2040, copper on its own is projected to reach the same scale as this current market value.
Securing reliable supply of critical minerals
The report emphasizes the crucial need to ensure a reliable and diversified supply of critical minerals to achieve future climate and energy goals. As the world’s appetite for technologies such as solar panels, electric cars, and batteries continues to grow rapidly, securing access to these essential resources has become paramount.
“Secure and sustainable access to critical minerals is essential for smooth and affordable clean energy transitions,” said IEA executive director Fatih Birol. “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. But this new IEA analysis highlights that there is still much to do to ensure resilient and diversified supply.”
Investment needed to meet demand
The report underscores the need for significant investment in the mining sector, with an estimated $800 billion required between now and 2040 to stay on track for a 1.5°C scenario. Without a strong uptake of recycling and reuse, the mining capital requirements would need to be even higher.
However, the IEA’s analysis reveals that announced projects are only sufficient to meet 70 percent of copper and 50 percent of lithium requirements by 2035, indicating a potential supply shortage if additional investments are not made.
Price fluctuations, shifting demand
Interestingly, the energy think tank also highlighted that the prices of critical minerals fell in 2023, returning to levels last seen before the COVID-19 pandemic. This was particularly evident in materials used to make batteries, with the price of lithium dropping by 75 percent and the prices of cobalt, nickel, and graphite falling by between 30 percent and 45 percent. While this has helped drive battery prices 14 percent lower, it has also provided a headwind for new investment in the mining sector.
Looking ahead
Moreover, the IEA’s report suggests that the demand for critical minerals will continue to grow, with clean energy applications being the main driver. Electric vehicles, in particular, are expected to consolidate their position as the largest-consuming segment for lithium and increase their share considerably in the demand for nickel, cobalt, and graphite.
Regional shifts in mining output
Regionally, the report highlights that Latin America is poised to capture the largest market value for mined output, reaching around $120 billion by 2030. Indonesia, on the other hand, is expected to witness the fastest growth in mining output value, doubling its market value to $75 billion by 2030 due to its burgeoning nickel production.
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