New Concern For Looming Global Mineral Shortage

Todd Moses
May 18, 2024

An International Energy Agency (IEA) analysis finds that while supplies of critical minerals have outpaced demand so far, sharp increases in production are needed to facilitate Paris climate targets.

Inputs that matter: These minerals are vital to producing renewable energy and powering electric vehicles.

  • The IEA's detailed project-level analysis shows that announced critical mineral projects would only meet about 70% of copper and 50% of lithium requirements in 2035, in a scenario in which countries were to meet the climate goals they have already stated.
  • The price of many critical minerals and rare earths fell in 2023, with a 75% drop in lithium prices; meanwhile, cobalt, nickel, and graphite dropped between 30% and 45%, helping to drive down battery costs.

The opportunity: The report calls out increasingly vulnerable supply chains, with diversifying production of many critical minerals amid highly concentrated control of key industrial processes in China.

  • The report finds that China's spending on and purchase of overseas mines reached a record high of $10 billion in the first half of 2023, with a focus on lithium, nickel, and cobalt.

Zoom in: Each IEA scenario presented in the report, including the net zero scenario that would meet Paris Agreement targets, would require a drastic scale-up in critical minerals production.

  • To achieve a net-zero pathway by 2050, the current market size of all key energy transition minerals would need to more than double to $770 billion by 2040.

Between the lines: Critical mineral mining, refining, processing, and recycling are concentrated in China and only a few other countries.

  • It is also pivotal to geopolitical risk, especially given tense relations between the BRICS and G7.
  • This market concentration makes the global mineral supply chains vulnerable to other disruptions, such as extreme weather and natural disasters.
  • Meanwhile, the Biden administration is raising tariffs on electric vehicles from China to 100% while China and Russia are becoming closer.

Follow the money: To circumvent tariffs and supply chain issues, companies such as Ford, GM, and Tesla are partnering with Chinese companies to create domestic battery plants.

  • "Tight copper mine supply is increasingly constraining refined production: the much-discussed lack of mine projects is finally starting to bite," Bank of America wrote in a note announcing that the "copper supply crisis is here."
  • Bloomberg reports that the closure of a massive mine operation in the Panamanian jungle is among the key reasons why the world is short on copper.
  • In March, Chinese smelters reduced output amid a concentrate shortage, leading to another price increase.

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Read More

  1. https://www.axios.com/2024/05/17/mining-critical-minerals-report
  2. https://banananomics.co/largest_tariff_surge_for_china
  3. https://banananomics.co/the_water_copper_and_electricity_surge_from_ai