Battery materials saw particularly large declines with lithium spot prices plummeting by 75% and cobalt, nickel, and graphite prices dropping by 30-45%. The IEA Energy Transition Mineral Price Index, which tracks a basket price of copper, major battery metals and rare earth elements, tripled in the two years following January 2020, but relinquished most of the increase by the end of 2023 – although copper prices remained at elevated levels. 

Demand for critical minerals experienced strong growth in 2023, with lithium demand rising by 30%, while demand for nickel, cobalt, graphite and rare earth elements all saw increases ranging from 8% to 15%. Clean energy applications have become the main driver of demand growth for a range of critical minerals. Electric vehicles (EVs) consolidated their position as the largest consuming segment for lithium, and increased their share considerably in the demand for nickel, cobalt and graphite.

From Africa to Indonesia and the People’s Republic of China (hereafter “China”), the ramp-up of new supply outpaced demand growth over the past two years. Together with an inventory overhang in the downstream sector (e.g. battery cells, cathodes) and a correction of overly steep price rises in 2021-2022, this produced downward pressure on prices.

Following the 75% growth in deployment in 2023, solar PV and wind account for the majority of capacity additions in every region in all IEA scenarios. This is accompanied by a substantial expansion of electricity networks, pushing up demand for copper and aluminium. Electric car sales neared 14 million in 2023, a 35% year-on-year increase, and continued growth is projected as major markets progress and adoption increases in emerging economies. In a scenario that limits global warming to 1.5 °C (the Net Zero Emissions by 2050 [NZE] Scenario), the sales share of electric cars rises from 18% today to 65% in 2030, pushing up demand for batteries by a factor of seven to 6 TWh in 2030. Electric cars are the major source of demand for batteries, but battery storage for the power sector exhibits faster growth.

Just as clean energy deployment expands, so too does demand for critical minerals. Mineral demand for clean energy technologies doubles between today and 2030 in a scenario that reflects today’s policy settings, the Stated Policies Scenario (STEPS). It is even higher in a scenario that meets all national energy and climate goals in full, the Announced Pledges Scenario (APS), and it almost triples by 2030 and quadruples by 2040 in the NZE Scenario, reaching nearly 40 Mt. Lithium sees the most rapid growth in demand, due to rising EV battery needs. In the NZE Scenario, for example, it increases by a factor of nine to 2040. In terms of production volume, copper – which connects a more electrified energy system – has by far the largest increase. Graphite demand almost quadruples by 2040 in the NZE Scenario, while demand for nickel, cobalt and rare earth elements doubles.

The combined market value of key energy transition minerals – copper, lithium, nickel, cobalt, graphite and rare earth elements – more than doubles to reach USD 770 billion by 2040 in the NZE Scenario. At around USD 325 billion, today’s aggregate market value of key energy transition minerals aligns broadly with that of iron ore. By 2040, copper on its own attains that scale.

Latin America captures the largest amount of market value for mined output with around USD 120 billion by 2030. Indonesia sees the fastest growth, doubling its market value by 2030 due to its burgeoning nickel production. Africa witnesses a 65% increase in market value by 2030. Nearly 50% of the market value from refining is concentrated in China by 2030. China also sees a rise in market value for mined materials with its growing copper and lithium production.

Increases in 2023 were smaller than those seen in 2022, but investment in critical mineral mining nonetheless grew by 10%. Investment by lithium specialists saw a sharp rise of 60%, despite weak prices. Exploration spending also rose by 15%, driven by Canada and Australia. Venture capital spending increased by 30%, with significant growth in battery recycling offsetting reduced investment in mining and refining start-ups. China’s spending on and acquisition of overseas mines has grown significantly in the past ten years reaching record levels of USD 10 billion in the first half of 2023 with a particular focus on battery metals such as lithium, nickel and cobalt.

Based on a detailed review of all announced projects, we have constructed two supply scenarios. The base case includes production from existing assets and those under construction, along with projects that have a high chance of moving ahead. The high production case adds in projects, which are at a reasonably advanced stage of development, seeking financing and/or permits. Using the APS as a benchmark, the situation in 2035 looks as follows:

• There is a significant gap between prospective supply and demand for copper and lithium: Anticipated mine supply from announced projects meets only 70% of copper and 50% of lithium requirements.
• Balances for nickel and cobalt look tight relative to confirmed projects, but better if prospective projects are included (our high production case).
• Graphite and rare earth elements may not face supply volume issues but are among the most problematic in terms of market concentration: over 90% of battery-grade graphite and 77% of refined rare earths in 2030 originate from China. 

The NZE Scenario necessitates further project developments across most minerals.

The geographical concentration of mining operations is set to rise further or remain high over the projection period in the base case. The situation improves somewhat in the high production case, indicating that many potential projects being developed in geographically diverse regions are not among the front-runners for development. For refined materials, the shares of the top three producing nations have all increased since 2020, with the trend most pronounced for nickel and cobalt. Announced projects indicate that refined material production is set to remain highly concentrated in a few countries.

Between now and 2030, some 70-75% of projected supply growth for refined lithium, nickel, cobalt and rare earth elements comes from today’s top three producers. For battery-grade spherical and synthetic graphite, almost 95% of growth comes from China. These high levels of supply concentration represent a risk for the speed of energy transitions, as it makes supply chains and routes more vulnerable to disruption, whether from extreme weather, trade disputes or geopolitics.

The concentration in the mining sector looks different if viewed through the lens of asset ownership, with US and European companies playing a major role for copper and lithium supplies whereas Chinese companies have a greater role for nickel and cobalt production, despite these minerals being mined elsewhere (e.g. Indonesia for nickel and the Democratic Republic of the Congo for cobalt).

This “N-1” analysis is a typical measure of the resilience of any system and reveals significant vulnerabilities. If the largest supplier and its demand is excluded, then available ”N-1” supply of all key energy transition minerals would fall significantly below material requirements. The situation is most pronounced for graphite where the available “N-1” supply covers only 10% of the N-1 material requirements – significantly below the minimum non-single-origin threshold of 35% proposed in the EU Critical Raw Materials Act. This indicates that without urgent efforts to expedite the development of projects, achieving announced diversification goals will be highly challenging.

Lower prices have been good news for consumers and for affordability, bringing clean technology costs back on a downward trajectory, including the 14% reduction in battery prices in 2023. However, falling prices also make spending to ensure reliable and diversified supply less appealing to investors. This price effect has had the biggest consequences in new and emerging resource-holders; in the case of nickel, three-quarters of operating or potential projects that are at risk are outside the top three producers.

The Outlook includes a new risk assessment framework for key energy transition minerals, across four major dimensions – supply risks, geopolitical risks, barriers to respond to supply disruptions, and exposure to environmental, social and governance (ESG) and climate risks. Overall, lithium and graphite show the highest risk scores. Lithium and copper are more exposed to supply and volume risks whereas graphite, cobalt, rare earths and nickel face more substantial geopolitical risks. Most minerals are exposed to high environmental risks. For example, today’s refining operations occur in places where grids tend to have a higher carbon intensity, relying mostly on coal-based electricity.

In the APS, approximately USD 590 billion is required over the same period. These increases need to be made in a way that fosters a more diversified array of supply sources in the future. Financing diversified critical mineral supply chains faces numerous challenges, such as cost inflation, long-term price uncertainty and limited value placed on diversification by consumers. This requires specific policy measures to reinforce the investment case for supply chain diversification. Enhancing market transparency can also help, from pricing – with benefits to be drawn from efficient price discovery mechanisms and financial tools to hedge risks – to information, with a strong need for increasing the availability of reliable data on consumption, supply and trade.

In the case of lithium, the combination of right sizing EV batteries, alternative chemistries and recycling could reduce demand by 25% in 2030 in the NZE Scenario, saving an amount roughly equivalent to today’s production. Recycling rates for many materials have exhibited limited growth in the past. In the NZE Scenario, however, this needs to change, with growing policy attention to stepping up rates of collection and re-processing. Recycled quantities of copper and cobalt could reduce 2040 primary supply requirements by 30%, and 15% for lithium and nickel. Without the uptake of recycling and reuse, mining capital requirements would need to be one-third higher.

Our systematic ESG performance tracking paints a mixed picture. The industry is making progress on worker safety, gender balance, community investment and renewable energy uses, but the same cannot be said for waste generation, emissions and water consumption and discharge, suggesting ample scope for improvement. The benefits associated with mineral production, such as revenue and jobs, have to be felt by producer countries and communities. Voluntary sustainability standards can help actors improve ESG performance, but greater transparency, due diligence, harmonised approaches to credibility and appropriate incentives are needed to tap their full potential.