Higher investment in critical minerals boosts chances of meeting climate targets

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Investment in critical minerals is catching up with the world’s clean energy ambitions, according to the International Energy Agency, even as it warned that efforts to diversify sources of supply have faltered for metals such as lithium, nickel and cobalt.

The Paris-based organisation said investment in developing critical minerals rose 30 per cent to exceed $40bn last year, building on a 20 per cent increase in 2021. The investment was led by a surge in Chinese spending, raising concerns that Beijing will extend its control of the market for certain products.

If all announced projects to develop critical-mineral resources, that help power electric cars, wind turbines and solar panels, are delivered on time, then supply should be sufficient to keep national climate pledges on track by 2030, the IEA’s report added.

“While demand continues to increase significantly . . . on the supply side there is some encouraging news,” said Fatih Birol, IEA executive director. “We are less worried than we were two years ago in terms of availability of critical minerals.”

Shortages of raw materials, including lithium and copper, are one of the biggest threats that could slow the shift to clean energy, and the report highlights how surging prices for a commodity such as lithium have boosted investment.

However, the report also pointed out the high probability of delays to mining projects that can be beset by ‘permitting issues’, funding challenges and technical risks.

Despite the increases in investment and supply, Birol said the “limited” progress in diversifying supply sources in the past three years, as well as the failure to reduce the high levels of emissions and water typically needed to generate metal products, were “two significant concerns”.

Chinese companies are powering ahead in securing resources essential to clean energy after nearly doubling their investment spending in 2022, compared with an average increase of 25 per cent for western mining groups such as BHP, Anglo American and Glencore, the IEA said.

At the processing stage for critical minerals, growing reliance on a small number of countries has become even greater, it said. Half of future lithium chemical plants are planned for China, while 90 per cent of new nickel refineries will be located in Indonesia, it added.

Evidence of China’s growing stranglehold of supply chains for critical minerals comes a week after Beijing announced plans to curb exports of gallium and germanium, raw materials vital for chipmakers, in response to US-led restrictions on semiconductor export sales.

The US is in the early stages of enacting policies to reshape global supply chains for strategic minerals through its $369bn Inflation Reduction Act package. However, mining projects typically take anywhere between seven and 20 years to come to fruition.

Demand for critical minerals is expected to more than double by 2030, adding to the challenge for the slow-moving mining sector to scale up on time. The market, which was worth $320bn in revenue last year, doubled in size in the previous five years, in part because of higher prices, the report added.

If the world wants to restrict global warming to within 1.5C of pre-industrial levels — a goal that is higher than most current national climate targets — then it would only have three-quarters of the minerals it needs by 2030, Birol warned.