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More critical minerals investment required to meet energy transition demand: IEA

Highlights

Lower mineral prices helped battery prices decrease around 14%

Demand for critical minerals set to grow strongly in all scenarios

Planned copper, lithium supply to fall short of demand

  • Author
  • Jacqueline Holman
  • Editor
  • Alisdair Bowles
  • Commodity
  • Metals

Higher and more diversified investments into critical minerals mining and production is required to support the energy transition and help reach energy and climate goals, the International Energy Agency said in its Global Critical Minerals Outlook 2024 published May 17.

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The IEA said that critical minerals markets were currently relatively well supplied, leading to a fall in prices -- which was good for affordability, but not good for new investments. This does not bode well for future supply, it added.

Prices for critical minerals such as lithium, cobalt, nickel and graphite all dropped in 2023 after climbing for the previous two years, which helped battery prices decrease by around 14%, the IEA said.

According to S&P Global Commodity Insights data, the Platts lithium spodumene concentrate with 6% lithium oxide content (SC6) assessment fell 84.6% in 2023, although it has risen 23.7% since the start of 2024 to $1,200/mt FOB Australia on May 16.

Platts' 99.8% Co metal assessment also dropped 24.8% in 2023 and has lost a further 2.9% so far in 2024 to $14.20/lb in-warehouse Rotterdam May 15.

The IEA noted that nickel and graphite prices had also fallen between 30% and 45% in 2023.

The Platts assessment of spot battery-grade nickel sulfate with minimum 22% nickel content and maximum 100 ppb magnetic material fell 34.8% in 2023, but was assessed at Yuan 30,400/mt DDP China May 16, up 24.1% since the start of 2024.

Platts assessed spherical graphite with 99.95% carbon content, uncoated with a size of 15 microns, at $1,930/mt FOB China on May 16, down 4% since it was launched on March 18.

IEA Chief Energy Economist Tim Gould said in a May 16 webinar on the report that it was interesting to look at the reason for the price declines, which were not on the demand side.

"Demand grew briskly over this period, but we had an even larger increase on the supply side coming from Africa, Indonesia and China. It's important to have in mind that inventories of some of the key elements for battery cells and cathodes were relatively well stocked, which helped to maintain that downward pressure on prices," Gould told the webinar.

He added that the lower prices had dampened enthusiasm among some investors, but overall capital flow remained "pretty robust," with continued increases in investment in nonferrous metal production and exploration spending in 2023.

Mining investments up 10% in 2023

Looking ahead, the report shows demand for critical minerals continuing to grow strongly under all its scenarios, driven by the deployment of clean energy technologies, with the combined market size of key energy transition minerals set to more than double to $770 billion by 2040.

Investment in critical minerals mining grew by 10% in 2023 and exploration spending rose by 15%, which the IEA described as still healthy, but slower than 2022's 30% growth.

Gould said the 2023 numbers were still "impressive," particularly some of the lithium-focused companies where investments were rising by around 60%, and also noted that exploration spending was quite widely dispersed around the world. "That is a positive signal then for the prospects of future diversification, at least on the mining side," he added.

The price declines were good for affordability, Gould said, pointing out that cathode material costs on a battery pack had risen from only 5% of the total cost in 2015 to around 30% in 2022, but had fallen to 25% in 2023 due to the lower metal costs.

However, he said the lower prices were a doubled-edged sword.

"The volatility, or price developments on the critical mineral side are really important for the prices that consumers see, or manufacturers see when they put those batteries together, but lower prices also cause difficulties on the supply side, with some existing and planned projects put on hold," Gould said.

He gave the example of nickel production, noting that more than 30 projects had either put production on hold or put development plans on hold for future projects as a result of declining nickel prices.

"I think the interesting finding here was that most of the projects that were at risk were the ones that would produce more diversified supply, so they were outside the top three producing countries, and that feeling that the projects from new and emerging producers are some of the higher cost projects is an important element of the overall picture," he said.

Planned copper, lithium supply to fall short

Overall, more investment is required, with the IEA's analysis of upcoming projects finding that announced projects in the pipeline would only be sufficient to meet 70% of copper and 50% of lithium requirements in 2035 in a scenario in which countries globally met their national climate goals.

The picture is better for other minerals if all scheduled projects are completed, but the upcoming projects would not change the high geographical concentration of supply or China's strong position in the refining and processing sector.

For the other minerals, the report's lead author, IEA senior energy analyst Tae-Yoon Kim, told the webinar that if all scheduled projects were completed, expected supply from announced projects would be within the range of the projected 2035 requirements to reach national and global climate goals.

"Overall the supply picture looks a bit better than what we assessed two years ago... but there is still much to do to ensure global supply of critical minerals. The same cannot be said for diversification -- our analysis of projects shows limited progress in terms of diversifying supply," he said.

He noted that in the period to 2030, announced projects indicated that refined material production would remain highly concentrated in a few countries, with around 75% of projected supply growth for refined lithium, nickel, cobalt and rare earth elements to continue to come from the current top three producers, namely Indonesia for nickel and China for all others.

Kim added that recycling and technological innovation could play a major role in tackling the supply challenges of critical minerals.

Gould noted that market transparency was also important.

"Many of these markets are thinly traded and there's a lot more that could be done to increase the availability of information on market balances and prices. We are also very much focused on reliable diversified supply and social governance questions," he said.