Surge in Demand for Critical Minerals Driven by Energy Sector, Says IEA
Demand for critical minerals crucial to low and zero-emission technologies has surged in recent years, with the energy industry’s growing needs seen as a major driver, according to the International Energy Agency (IEA). In a new report, the Paris-based organization revealed that between 2017 and 2022, there was a significant increase in demand for key minerals, including a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel. The IEA’s Critical Minerals Market Review identified “demand from the energy sector” as the main factor behind this surge.
To meet the increasing demand, investment in the development of critical minerals has also risen. The IEA reported a 30% increase in investment in 2022, following a 20% rise in 2021. Companies specializing in lithium development recorded a 50% increase in spending, while firms in China nearly doubled their investment in the sector last year.
The importance of critical minerals, such as lithium, in low and zero-emission technologies cannot be overstated. They play a vital role in technologies like electric vehicles (EVs) and wind turbines. With the record deployment of these technologies, the demand for critical minerals has reached unprecedented levels.
However, there are challenges to be faced in ensuring an adequate supply of critical minerals. The IEA warned of the risk of delays to projects and “technology-specific shortfalls” that could hinder supply. Despite the significant growth in the sector, more projects will be required by the end of the decade to limit global warming to 1.5 degrees Celsius, a key goal of the Paris Agreement.
The market for critical minerals crucial to the energy transition reached $320 billion in 2022, doubling in size over the past five years. Start-ups in the critical minerals sector also raised a record $1.6 billion last year. However, the IEA emphasized the need for diversification of supply sources and the development of secure and sustainable supply chains for critical minerals.
Geopolitically, the development of sites for mining and processing critical minerals is of great significance. China currently leads in the extraction of graphite and rare earths, as well as the processing of lithium. However, the country remains heavily reliant on the Democratic Republic of the Congo for mined cobalt. The IEA’s report also highlighted the limited progress in diversifying supply sources in the past few years.
The sustainability credentials of the critical minerals industry also need improvement. The IEA noted a significant increase in water withdrawals and high greenhouse gas emissions in the sector. Ensuring secure and sustainable supply chains for critical minerals is crucial for the world to achieve its energy and climate goals, according to Fatih Birol, the IEA’s executive director.
As demand for critical minerals continues to rise, addressing the challenges and ensuring a sustainable supply becomes increasingly urgent. Additional investment and efforts to diversify supply sources and improve sustainability will be essential for the energy transition’s success.