European Union: the IEA publishes its first Critical Minerals Market Review

In its most recent publication, the IEA confirms a picture in line with previous analyses: the demand for critical raw materials shows unprecedented growth, stimulated by an ever-increasing demand for clean energy technologies (electric vehicles, wind turbines, photovoltaic panels, etc.). From 2017 to 2022, demand for these technologies was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt and a 40% rise in demand for nickel. In 2022, the share of demand for raw materials used in clean energy technologies out of total demand reached 56% for lithium, 40% for cobalt and 16% for nickel, compared to 30%, 17% and 6% five years ago.

The study highlights trends in extraction activities related to the main raw materials needed for the energy transition. In 2022, the amount of copper extracted increased (+4%) after years of stability, while lithium production experienced decisive growth (+38%). In the same year, the nickel industry reached a record level of supply, with an increase in extraction of 18%. Finally, in the last year, cobalt extraction levels have also increased (+23%).

Taking a look at the financial dynamics, in 2021 and the first months of 2022, the prices of critical raw materials (particularly lithium and nickel) were characterized by high volatility. Subsequently, in the second half of 2022 and in 2023, prices began to come down, but were nevertheless above the historical average.

The increase in these prices has caused a reversal in the steady decline in the cost of clean energy technologies (due to technological innovation and economies of scale) that occurred from the last decade to the end of 2020. For example, the percentage of raw materials in the cathode in batteries has gone from 2% of the total price in 2010 to 10% in 2017 to 40% in 2022.

High prices and rising demand have led to a doubling of the market for critical raw materials over the last five years, reaching USD 320 billion by 2022. As a result, investments in the sector saw an increase of around 30% last year: in particular, investments in lithium (+50%), copper and nickel grew significantly.

From a political and regulatory point of view, the need to ensure an adequate and sustainable supply of critical raw materials is a priority for all countries around the world. In fact, countries, but also companies, are developing an increasingly strategic and structured approach, developing a medium-term vision capable of defining their own needs and risks, and avoiding being driven by a single issue or emergency.

In 2022, spending on exploration for raw material deposits increased by 20%. This growth is mainly due to increased exploration spending 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 taking place in Brazil and Africa. In addition, other countries are focusing on refining capacity, technological innovation and recycling of raw materials.

The study also presents an overview of the environmental and social sustainability of the mining sector, traditionally associated with a number of negative aspects. Several indicators suggest the market's willingness to intensify efforts to mitigate the impacts related to its activities. For example, some large companies in the sector have committed to achieving the goal of "Net Zero Emissions" by 2050 and improving information disclosure for environmental and social data.

Despite these signs, based on analysis of the sustainability reports of 20 major players, the IEA shows that the results achieved by the sector are mixed and major challenges remain. Progress is reported in community investment, worker safety and gender equality. However, greenhouse gas emissions associated with mining activities remain high and stable (between 0.15 - 0.20 kg CO2e per kg of raw material produced). Water withdrawals almost doubled between 2018 and 2021, while waste production fluctuated around 5,000 Mt over the same period.

The industry as a whole will face increasing pressure to provide detailed and transparent information that facilitates a more complete understanding of their business performance. Indeed, many customers need to track impacts throughout the entire life cycle of products, including raw materials used as input 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 bold, broad strategy capable of combining investment, innovation, recycling and sustainability.

The presentation of the Critical Minerals Market Review is available at the following link: https://youtu.be/R3DKlLViNrE