Commodities are part of our everyday lives. From crude and edible oil to minerals and metals. The shift to clean energy and deployment of clean technologies across the world in recent years has put the spotlight on a group of minerals – cobalt, lithium, nickel, graphite, copper, neodymium, manganese, chromium, molybdenum, silicon, zinc, rare earths and others – that are heavily used in these technologies.
The rise of electric cars, wind and solar projects and battery storage systems has also triggered a massive demand for these critical minerals, leading to a race among countries to secure their supplies. Electric car sales have soared and estimates show that in 2022 sales were more than 10 million units and about 14% of all cars sold were electric, up from 5% in 2020. This has also led to a surge in demand for battery storage systems.
According to International Energy Agency (IEA), nearly 340 gigawatt capacity was added and the global spending on renewables was estimated at USD 600 billion in 2022. “From 2017 to 2022, demand from the energy sector was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel. In 2022, the share of clean energy applications in total demand reached 56% for lithium, 40% for cobalt and 16% for nickel, up from 30% for lithium, 17% for cobalt and 6% for nickel five years ago,” according to an IEA report. The rising demand for these energy transition materials has also resulted in surging prices. The IEA analysis shows that the size of the market for these minerals has doubled in the past five years to nearly USD 320 billion – almost similar to the size of the iron-ore mining industry. The crucial factor is that these minerals are controlled by a few countries.
“For lithium, cobalt and rare earth elements, the world’s top-three producing nations control well over three-quarters of the global output. In some cases, a single country is responsible for around half of worldwide production. The Democratic Republic of the Congo (DRC) and China were responsible for some 70% and 60% of global production of cobalt and rare earth elements, respectively, in 2019,” according to IEA. China also dominates some of the segments, particularly processing. IEA estimates show that China’s share of refining is around 35% for nickel, 50-70% for lithium and cobalt, and about 90% for rare earth elements.Chinese firms have made a raft of investments in assets in Australia, Chile, DRC and Indonesia. The supply chain for such minerals has become complex due to control by a handful of countries. “The level of concentration is even higher for processing and refining operations. China has gained a strong presence across the board. China’s share of refining is around 35% for nickel (the figure becomes higher when including the involvement of Chinese companies in Indonesian operations), 50‑70% for lithium and cobalt, and as high as 90% for REE processing that converts mined output into oxides, metals and magnets,” according to the IEA report. The race for these critical minerals — key to achieving climate goals — has prompted a wave of policy responses from governments and companies. The US, the European Union, Australia and Canada have enacted regulations and policies for sustained supply of these critical minerals. Countries have also resorted to curbs on imports and exports.
“Among resource-rich countries Indonesia, Namibia and Zimbabwe have introduced measures to ban the export of unbeneficiated mineral ore. Globally, export restrictions on critical raw materials have seen a fivefold increase since 2009,” says IEA. An IEA analysis of the investment levels of 20 large mining companies with a significant presence in developing energy transition minerals shows a strong rise in capital expenditure on critical minerals, spurred by the robust momentum behind clean energy deployment. It said that firms specialising in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel. Companies based in China nearly doubled their investment spending in 2022, according to the IEA analysis. Spending on lithium exploration activities rose by 90% while that on uranium grew by 60%, triggered by supply worries linked to Russia. Nickel showed a 45% growth as regards exploration. Amperex Technology Co Limited, the world’s largest battery cell maker, Tesla, and General Motors have made bold moves to invest directly in the value chain to secure supplies.
India, which has an ambitious energy transition plan, is also making all-out efforts to secure supplies. Capacity for refining and production, and reserves of minerals such as cobalt, nickel, lithium and copper are minuscule. Recently, there has been some success with the discovery of a 5.9 million metric tonne lithium reserve in Jammu and Kashmir and another one in Rajasthan. New Delhi is also negotiating with Australia, Chile, Bolivia and Argentina.
Given the focus on critical mineral supplies, moves are on to start free trade agreement (FTA) talks with Chile and Peru. Latin America accounts for 40% of global copper production, led by Chile (27%), Peru (10%) and Mexico (3%). The region supplies 35% of the world’s lithium, led by Chile (26%) and Argentina (6%), the second and fourth largest global producers, respectively. The region holds more than half of global lithium reserves, largely in Argentina (21%) and Chile (11%). Bolivia also holds huge untapped lithium resources, according to an IEA paper.
“As with many challenges due to the unavailability of raw minerals and fierce global competition, particularly from China and the US, to dominate the global raw material supply and battery value chain, India soon needs to build up a robust and continuous supply chain of raw minerals to achieve its domestic demand for advanced chemistry batteries and to reduce its import-based dependency. Only a collaborative approach between the government and industry will allow India to conquer these challenges,” according to a paper by the Confederation of Indian Industry (CII).
“Improved access to raw materials can be provided in multiple ways, including reduction of import duties on raw materials, improving bilateral ties with countries rich in the raw materials, and encouraging Indian companies to acquire those resources. Providing incentives to local players to build refining capabilities, promoting sustainable domestic graphite mining with the relaxation of stringent regulatory restrictions, increasing import duties on cells and batteries, and incentivising the recycling of batteries can provide further impetus to localise cell manufacturing,” the paper added.
