Global cooperation on minerals powering ahead amid rise in bilateral agreements

Global economies are working together more than ever in a bid to shore up access to minerals and metals crucial to tackling climate change.

In a report titled Critical Minerals Market Review 2023 released earlier this week, the International Energy Agency (IEA) says international cooperation on critical minerals is rapidly developing to ensure reliable mineral supplies.

The IEA notes in recent times there have been numerous bilateral agreements, alongside multinational cooperations, to co-develop critical mineral projects and ensure improved access to mineral supplies.

One recent example occurred earlier this week when Prime Minister Anthony Albanese visited German Chancellor Olaf Scholz in Berlin. The visit was scheduled to discuss boosting trade and investment between the regions, as well as climate action, clean energy, and Australia’s defence and security cooperation.

Speaking in Berlin on 10 July 2023, the PM announced Australia has also joined the global ‘Climate Club’, which is backed by the Group of Seven major economies, in a collective initiative to further international climate action.

As reported by Mining.com.au, Albanese said clean energy cooperation is at the core of the Australia’s relationship with Germany. He outlined to Chancellor Scholz Australia’s ambition to become a renewable energy powerhouse.

The PM reiterated that Australia and Germany are forging ahead and seizing the opportunities of clean energy transition while delivering new jobs and export opportunities for each country.

“Like minded countries including all of the G7, countries such as Indonesia, Chile, and Colombia, that are taking action determined to have an ambitious climate change agenda. Secondly, we’ve discussed the opportunities that we have, both with the German government and with German businesses to cooperate, particularly in areas such as green hydrogen – we see this as an enormous two way opportunity.

“Like minded countries including all of the G7, countries such as Indonesia, Chile, and Colombia, that are taking action determined to have an ambitious climate change agenda”

Green hydrogen, critical minerals, advances in the new economy present opportunities for Australia here in Europe, and part of that is the Australia-EU Free Trade Agreement.

Australia wants to conclude this agreement, but we won’t sign up unless it is in Australia’s interests and Chancellor Scholz is playing a very constructive role there. We also of course, have witnessed the signing of the agreement to provide one hundred Boxer Heavy Weapon Carriers here in Germany, that will be produced in Queensland. This is good for jobs, good for our national sovereignty, good for our economy, and good for the relationship between Australia and Germany.”

Meanwhile, the US and Japan recently signed a trade agreement specifically centred on critical minerals, and further bilateral trade agreements with the European Union are under negotiation.

The IEA also notes other bilateral agreements include the US IRA, which gives priority to materials sourced domestically or from partner countries, creating a context for an acceleration of bilateral trade agreements. The Mineral Security Partnership was also launched by the US and key partner countries, aiming to facilitate cross-investment in new mines and processing facilities in diversified regions.

Commodities for clean energy technologies

As detailed in Sprott Energy Transition Materials Monthly on 10 July 2023, such bilateral agreements come as the 20-year era of China driving demand for metals such as copper, aluminium, and iron ore has most likely reached its peak.

Sprott notes the US and its partners “will almost certainly dominate the future of metals demand as China grapples with challenges including deglobalisation pressures, a declining population and escalating geopolitical issues”.

The China commodity super-cycle, which Sprott says has been fuelled by urbanisation and industrialisation, appears to be ending and a new commodity super-cycle centred around energy transition and decarbonisation seems to be is rising in the West.

Record deployment of clean energy technologies such as solar PV and batteries is powering unprecedented growth in the critical minerals markets. Electric vehicle (EV) sales increased by 60% in 2022, according to the IEA, exceeding 10 million units. Energy storage systems experienced even more rapid growth, with capacity additions doubling in 2022. Solar PV installations continue to shatter records, while wind power is set to resume its upward trajectory after several subdued years.

The IEA says this has led to a significant increase in demand for critical minerals. From 2017 to 2022 demand from the energy sector 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.

The Critical Minerals Market Review 2023 report adds that in 2022, the share of clean energy applications in total demand reached 56% for lithium, 40% for cobalt and 16% for nickel, up from 30% for lithium, 17% for cobalt, and 6% for nickel 5 years ago.

The critical minerals market appears to be responding to some of the aforementioned moves. The Nasdaq Sprott Energy Transition Materials Index rose 9.73% in June. At the end of May, there was a mini-selloff across most commodities and commodity-related equities due to disappointing economic data from China and concerns about a possible US recession.

By 30 June 2023, Sprott reports the market began to price in a more optimistic outlook, including the likelihood of stimulus in China in response to its weak economic data and the fading probability (or delay) of a US recession. The Index is up 3.31% year-to-date as of 30 June, as the energy transition complex continues to trade sideways in a longer-term bullish consolidation pattern.

Policies to enhance supply security

According to the IEA, a growing number of countries that rely on critical minerals imports have now introduced policies designed to enhance minerals supply security. The IEA is developing a voluntary critical mineral security program with its member countries to bolster preparedness against potential disruptions.

For example, Canada updated its list in 2021, the UK did in 2022, while the European Commission and the US updated theirs so far in 2023. The IEA says some countries have also strengthened their market intelligence functions to gain better insights into the market.

“In response to the pressing need to ensure secure mineral supplies, there has been a proliferation of policy initiatives over the past few years…”

“In response to the pressing need to ensure secure mineral supplies, there has been a proliferation of policy initiatives over the past few years, including landmark measures such as the European Union’s battery regulation and Critical Raw Materials (CRM) Act, the US’s Inflation Reduction Act (IRA), Australia’s Critical Minerals Strategy and Canada’s Critical Minerals Strategy, among others.”

The IEA Critical Minerals Policy Tracker has identified nearly 200 policies and regulations from 25 countries and regions worldwide, with more than 100 of these enacted in just the past few years.

“Although countries approach the issue with different goals, there is growing recognition that policy intervention is needed to ensure adequate and sustainable mineral supplies to meet the needs of the energy transition.

The majority of these initiatives share a common objective – to diversify the current supply chains, which are highly concentrated. These efforts aim to mark a departure from the currently dominant commodity supply model, where raw materials are extracted from resource-rich nations in developing economies, processed in China and then shipped to consuming nations as refined metals.”

However, the Critical Minerals Market Review 2023 report adds that countries are taking different approaches to achieve the aforesaid goal, which is often influenced by the position of countries within the supply chain. For example, some countries hosting large underexplored and underexploited mineral resources are increaasingly focusing on developing their domestic production and expanding their value chains.

Consuming nations place more emphasis on security mechanisms, refining capacity, technology innovation and recycling, the IEA says.

“Nonetheless, the promotion of sustainable and responsible practices in critical minerals supply chains remains a common component of many policy approaches.”

Reassessing legal frameworks

The IEA suggests that in response to the forecasted increase in demand for critical minerals, policy makers, particularly those in resource-rich countries, are reassessing their legal frameworks for mining. This involves providing support for exploration, such as Canada’s 30% Critical Mineral Exploration Tax Credit.

“In nations that are traditional suppliers of critical minerals, there is ongoing modernisation of mining policies to address environmental concerns and foster stakeholder participation. For example, the Chilean government released its new National Mining Policy framework in January 2022, which was the result of two years of collaboration involving representatives from private companies, academia, and civil society.”

In nations that are traditional suppliers of critical minerals, there is ongoing modernisation of mining policies to address environmental concerns and foster stakeholder participation

Many countries are also striving to capture more value from extracting their natural minerals and resources. Mexico is one example when it nationalised its lithium industry in 2022. In Chile there are ongoing reforms related to copper mining royalties, as well as a proposed revision of the lithium concession system, with an increased role given to a state-owned player.

The IEA notes that interventions are extending to other parts of the value chain. Indonesia has banned the export of nickel ore to nurture its midstream value chain, with a potential export ban being considered for bauxite, tin, and cobalt.

In Africa, Namibia and Zimbabwe are following similar strategies, banning with an export ban of all un-beneficiated mineral ore. A recent study by the OECD shows that export restrictions on critical raw materials have seen a fivefold increase since 2009.

The IEA says nations relying on imports are now also reviewing the competitiveness of their mining policies to enhance self-sufficiency in critical minerals while upholding environmental safeguards.

“This entails identifying strategic projects and streamlining processes, such as the establishment of ‘one-stop-shop’ permits or reducing permit delays, as proposed in the EU CRM Act.”

Write to Adam Orlando at Mining.com.au

Images: International Energy Agency
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Written By Adam Orlando
Mining.com.au Editor-in-Chief Adam Orlando has more than 20 years’ experience in the media having held senior roles at various publications, including as Asia-Pacific Sector Head (Mining) at global newswire Acuris (formerly Mergermarket). Orlando has worked in newsrooms around the world including Hong Kong, Singapore, London, and Sydney.