In early July, the International Energy Agency (IEA) launched the first edition of the "Critical Minerals Market Review" study. The report provides an up-to-date and complete overview of the critical raw materials market so essential to the energy transition, including investment, financial, technology, regulatory, and policy trends.
In its most recent publication, the IEA confirms an outlook consistent with previous studies: the demand for critical raw materials is experiencing unprecedented growth, driven by an increasingly high demand for green technologies (electric vehicles, wind turbines, PV solar panels, etc.). From 2017 to 2022, the demand for these technologies was the main factor driving global demand for lithium three-fold and increasing the demand for cobalt and nickel by 70% and 40%, respectively. In 2022, the proportion of raw materials used in green technologies in the total demand reached 56% for lithium, 40% for cobalt, and 16% for nickel, compared to 30%, 17%, and 6% five years ago, respectively.
The study provides trends in extraction activities related to the key raw materials necessary for the energy transition. In 2022, the amount of copper extracted increased by 4% after years of stability, while lithium production exhibited significant growth of 38%. That same year, the nickel industry reached a record level of supply, with an 18% increase in extraction. Finally, in the past year, cobalt extraction levels have also risen by 23%.
When analyzing the financial dynamics, in 2021 and the early months of 2022, the prices of critical raw materials, particularly lithium and nickel, were marked by high volatility. Then, in the second half of 2022 and 2023, the price levels started to stabilize, although higher than historical averages.
The increase in these prices has resulted in a reversal of the continuous decline in the cost of green technologies (due to technological innovation and economies of scale) that occurred from the last decade until the end of 2020. For example, the impact of raw materials for cathodes in batteries has risen from just 2% of the total price in 2010 to 10% in 2017, and now it accounts for 40% in 2022.
The high price levels and increased demand have led to a doubling of the critical raw materials market in the last five years, reaching $320 billion in 2022. As a result, investments in the sector increased by around 30% last year, with significant growth seen in those related to lithium (+50%), copper, and nickel.
From a policy and regulations perspective, all countries around the world believe that ensuring an adequate and sustainable supply of critical raw materials is a top priority. Indeed, both countries and companies are developing an increasingly strategic and structured approach, creating a medium-term vision to define their own needs and risks, and avoid being solely reactive to single issues or emergencies.
In 2022, spending on the exploration of raw material deposits increased by 20%. This growth was mainly due to the increase in research expenses for lithium (+90%), uranium (+60%), and nickel (+45%). Canada and Australia, with year-on-year growth of over 40%, lead this ranking, while more exploration activities are being carried out in Brazil and Africa. Meanwhile, other countries are focusing on refining capacity, technological innovation, and raw material recycling.
The study also provides an overview of the environmental and social sustainability of the mining sector, which has traditionally been associated with a range of negative aspects. Several signs suggest the market's willingness to intensify efforts aimed at mitigating the impacts related to its activities. For example, some major companies in the sector have committed to achieving a “Net Zero Emissions” goal by 2050 and improving the disclosure of environmental and social data.
Despite these signs, based on an analysis of the sustainability reports of 20 major players, the IEA demonstrates that the outcomes achieved by the sector are varied, with progress reported in community investment, worker safety, and gender equality. However, greenhouse gas emissions associated with mining activities remain consistently high (between 0.15 - 0.20 kg of CO2e per kg of raw material produced). Water extractions nearly doubled between 2018 and 2021, while waste production fluctuated around 5,000 Mt during the same period.
The industry as a whole will face increasing pressure to provide detailed and transparent information to enable a comprehensive understanding of its business performance. In fact, many customers need to track the impact throughout the entire life cycle of products, including the raw materials used as inputs for their final products.
In conclusion, to promote a secure and sustainable supply of critical raw materials, the study highlights the need to develop a comprehensive and bold strategy that combines investment, innovation, recycling, and sustainability.
Watch the presentation of the study at the following link: https://youtu.be/R3DKlLViNrE