The International Energy Agency (IEA) says while demand for critical minerals has been strong in recent years, investment momentum has not kept pace.
A report by the agency found investment in critical minerals grew by just 5% in 2024, down from 13% in 2023, and exploration activity plateaued, marking a pause in the upward trend seen since 2020.
Meanwhile, demand for lithium climbed 30% in 2024, which the IEA notes significantly exceeds the 10% annual growth rate seen in the 2010s.
At the same time, critical mineral markets have become more concentrated, especially when it comes to refining and processing.
For copper, lithium, nickel, cobalt, graphite and rare earth elements, the average market share of the top three producers rose to 86% in 2024 from around 82% in 2020.
Almost all supply growth came from the single top supplier: Indonesia for nickel, and China for all other minerals. This has placed downward pressure on prices, particularly the battery metals, which has witnessed a doubling in supply growth from what was recorded in the late 2010s.
This supply concentration combined with the spread of export restrictions elevates the risk that the critical minerals sector will witness “painful disruptions”, the IEA says.
The IEA found that of the energy-related strategic minerals covered in its report, 55% are now subject to some form of export control, with the scope of restrictive measures widening to include not just raw and refined materials but also processing technologies.
China is the top refiner for 19 of the 20 minerals covered in the report, having squared away an average market share of around 70%.
While policy makers are now aware of the challenges the sector faces, a detailed IEA analysis of announced projects indicates that progress towards more diversified critical mineral supply chains is set to be slow.
The current policy settings and investment trends are likely to see the average share of the top three suppliers decline only marginally over the next decade, effectively returning to the concentration levels seen in 2020, according to the IEA.
Executive Director Fatih Birol says even in a well supplied market, critical mineral supply chains can be highly vulnerable to supply shocks, whether it is from extreme weather, a technical failure or trade disruptions.
“The impact of a supply shock can be far-reaching, bringing higher prices for consumers and reducing industrial competitiveness,” Birol says.
The copper market is particularly at risk of a supply shortage, with the current pipeline of projects set to fall short of meeting demand by 30% by 2035.
Write to Angela East at Mining.com.au
Images: Stock
