Substantial growth in investments in nickel, cobalt and other metals that are important for the energy transition

Investments in the extraction of raw materials that are crucial for the energy transition have grown sharply worldwide in the past two years. The supply of these substances, such as lithium, cobalt, copper and nickel, is also increasing. This is evident from a report published on Tuesday by the International Energy Agency (IEA). According to the IEA, the trend is favorable for the fight against global warming, but the uncertainties surrounding the supply of the metals are large.

The Paris-based agency first published its Critical Minerals Market Review, a report that will be published annually from now on. Two years ago, the IEA warned that the enormous demand for these so-called critical materials due to the energy transition would lead to dire shortages. Lithium, cobalt, copper and nickel are used for batteries, solar cells, wind turbines and power grid reinforcement.

Now the IEA is more optimistic. Global investment in mining the metals rose 30 percent last year to more than $40 billion, following a 20 percent increase a year earlier. The total market for raw materials has doubled in the last five years to a value of 320 billion dollars (290 billion euros). “We are encouraged by the rapid growth of the market for critical metals, which are critical to meeting energy and climate goals,” said IEA director Fatih Birol.

However, it is uncertain whether the growing supply can keep up with demand, Birol notes. Between 2017 and 2022, the demand for lithium has tripled, the demand for cobalt increased by 70 percent, the demand for nickel by 40 percent. The energy sector was largely responsible for this demand boom.

The demand for the substances will continue to increase, depending on which scenario is followed. If countries stick to their own commitments to reduce emissions, demand for the critical metals will double by 2030. If the global energy sector is zero CO by 2050₂ more emissions (just zero), demand for the metals will more than triple.

The investments that have now been made must still result in the actual extraction of the earth metals. “We all know that mining projects are often delayed – there are cost overruns and licensing issues,” said Birol. Copper in particular is in danger of becoming scarce if production does not increase quickly, he says.

Read also: Sino-US export restrictions curtail international free trade

Geopolitical competition

A cause for concern for the IEA is that, even with sufficient global extraction of the raw materials, their supply is not assured. The production of copper, cobalt and lithium is highly concentrated in China. Half of the new lithium plants are planned in China. Indonesia dominates nickel mining and production. Nearly 90 percent of new nickel refineries are planned in this country. Countries are increasingly introducing export restrictions. Last week, China announced that it would require licenses for the export of gallium and germanium, substances used in semiconductors, solar panels and electric cars.

Western countries and Japan are trying to work together to secure the supply routes for the critical raw materials, beyond geopolitical rival China. Researchers at KU Leuven calculated that Europe will need 861 million kilos of lithium in 2050, forty times more than in 2020.

Also problematic, according to the IEA, is that the extraction of the metals continues to have a significant impact on the environment: the CO₂emissions from the mining companies are not going down. Water use doubled between 2018 and 2021. However, according to the IEA, progress is visible in improving employment conditions in the sector.