Introduction Critical minerals, essential for a range of clean energy technologies, have risen up the policy and business agenda in recent years. Rapid growth in demand is providing new opportunities for the industry, but a combination of volatile price movements, supply chain bottlenecks and geopolitical concerns has created a potent mix of risks for secure and rapid energy transitions. This has triggered an array of new policy actions in different jurisdictions to enhance the diversity and reliability of critical mineral supplies. Since the International Energy Agency’s (IEA) landmark analysis on the Role of Critical Minerals in Clean Energy Transitions and the new ministerial mandates in March 2022, the Agency has expanded its work on critical minerals to help policymakers address these emerging challenges and ensure reliable and sustainable supplies of critical minerals. These efforts include a commitment to regular market monitoring, which aims to provide a clear understanding of today’s demand and supply dynamics and what they mean for the future. In this inaugural piece of analysis, we review the latest price, investment and production trends in the critical minerals sector. The first chapter provides a snapshot of industry developments in 2022 and early 2023. The second chapter reviews key trends in the battery sector given its importance in driving demand growth for critical minerals. The third chapter presents a concise review of key trends for each individual commodity. In the final chapter, we present implications for policy and industry stakeholders.

Executive summary Record deployment of clean energy technologies such as solar PV and batteries is propelling unprecedented growth in the critical minerals markets. Electric car sales increased by 60% in 2022, exceeding 10 million units. Energy storage systems experienced even more rapid growth, with capacity additions doubling in 2022. Solar PV installations continue to shatter previous records, and wind power is set to resume its upward march after two subdued years. 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. 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 five years ago.

Critical mineral supplies are having a major impact on the affordability of energy transitions Many critical minerals that are vital for clean energy technologies experienced broad-based price increases in 2021 and early 2022, accompanied by strong volatility and significant peaks, particularly for nickel and lithium. With the exception of lithium, most prices began to moderate in the second half of 2022. Expectations for China’s reopening underpinned a brief rally at the end of 2022, but prices resumed their declines in the first few months in 2023, including lithium, on the back of weak consumption, new supply plans and concerns about a possible recession. China’s reopening has not yet translated into a revival of industrial activities, as the recovery has been driven mostly by its service sector. Beyond China, across many economies, manufacturing purchasing managers’ indices are consistently underperforming their service counterparts, leading to weakness in demand for industrial metals. Further, the reduction in EV subsidies and price cuts for conventional cars in China put additional pressure on prices.

Strong cash flows and the momentum behind energy transitions are driving growth in investment and exploration spending Thanks to high commodity prices, the mining industry had another strong year in 2022, which resulted in elevated profitability and cash flows. In addition, growing policy support to diversify critical mineral supply chains prompted many mining companies to increase their investment in critical minerals development. We have assessed the aggregate investment levels of 20 large mining companies that have a significant presence in developing minerals essential for the energy transition. The list includes diversified mining majors and specialised developers for specific energy transition minerals such as copper, nickel, cobalt and lithium. Following the 20% increase in 2021, investment spending recorded another sharp uptick by 30% in 2022. Companies specialising in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel developments. Companies based in China nearly doubled their investment spending in 2022.

Investors are backing start-ups with new processes to break into critical mineral supply chains With technical, regulatory and political developments all pointing to a large future market for critical minerals, innovators with new techniques for extracting and processing them have been able to attract funds for testing and scale-up. In 2022, despite a dip in overall venture capital (VC) funding for technology entrepreneurs, critical minerals start-ups raised record amounts of equity, reaching USD 1.6 billion, of which USD 0.25 billion was for higher risk early-stage ventures. This 160% year-on-year increase took the critical minerals category to 4% of all VC funding for clean energy in that year. The first quarter of 2023 has been strong for critical minerals, despite a severe downturn in other VC segments, such as digital start-ups. Investments so far in 2023 put critical minerals on track to overtake 2021 levels by the year’s end, and beat 2022 for early-stage deal value alone. The momentum for critical minerals start-ups in 2023 indicates that investors expect the policy environment to enable new projects to reach financial close, with a significant share going to the unconventional mineral resources in which small entrepreneurs are most active.

New batteries on the horizon?

Acknowledgements This report was prepared by the Energy Supply and Investment Outlook (ESIO) Division of the Directorate of Sustainability, Technology and Outlooks (STO), in co-operation with other directorates of the International Energy Agency (IEA). Tae-Yoon Kim co-ordinated the work and was the lead author, and he designed and directed the report together with Tim Gould, Chief Energy Economist. The principal authors from across the agency were: Simon Bennett (venture capital investment), Hippolyte Boutin (mining), Eric Buisson (modelling, policy, demand and supply trends), Amrita Dasgupta (clean energy technology and battery trends), Tsuyoshi Deguchi (investment, mergers and acquisitions), Alexandre Gouy (modelling, recycling), Alexandra Hegarty (rare earth elements), Yun Young Kim (manufacturer strategies, cobalt), K.C. Michaels (environmental and social issues), Toru Muta (supply, individual commodity review), Tomás de Oliveira Bredariol (environmental and social issues), Ryszard Pospiech (modelling), Joyce Raboca (environmental and social issues, nickel) and Natalie StClair (environmental and social issues). Eleni Tsoukala provided essential support.

Source:http://IEA