Critical minerals market risks potential disruption, IEA says

The critical minerals market risks a potential disruption as it faces a two-pronged challenge from concentrated supply in a handful of countries and the growth of export restrictions, the International Energy Agency (IEA) has said.

The average market share of the top three producers for copper, lithium, nickel, cobalt, graphite and rare earth elements rose to 86 per cent in 2024, from about 82 per cent in 2020, the Paris-based agency said in a new report on Wednesday. Two countries have been dominating in the supply growth of critical minerals – Indonesia for nickel and China for all other minerals, the study found.

"While policymakers have woken up to the challenges, a detailed IEA analysis of announced projects indicates that progress towards more diversified critical mineral supply chains is set to be slow," the IEA said. "Based on today’s policy settings and investment trends, the average share of the top three suppliers is projected to decline only marginally over the next decade, effectively returning to the concentration levels seen in 2020."

Critical minerals are vital to several major industries, and they have only become more important with the rapid pace of technological advancements. Minerals such as copper, lithium, nickel, cobalt and rare earth elements are important for products including wind turbines, electricity networks and electric vehicles.

Their use varies by technology; for example, cobalt, graphite, lithium, manganese and nickel are vital for battery performance, while rare earths are components needed to lower emissions, reduce energy consumption and improve variables such as speed and thermal stability.

“Even in a well-supplied market, critical mineral supply chains can be highly vulnerable to supply shocks, be they from extreme weather, technical failure or trade disruptions,” the IEA's executive director Fatih Birol said. “The impact of a supply shock can be far-reaching, bringing higher prices for consumers and reducing industrial competitiveness.”

Demand for vital minerals used in the energy industry has grown in recent years. Lithium demand rose by nearly 30 per cent in 2024, significantly exceeding the 10 per cent annual growth rate of the 2010s, according to the IEA. Demand for nickel, cobalt, graphite and rare earths, meanwhile, increased by 6 to 8 per cent in 2024, largely driven by energy applications such as electric EVs, battery storage, renewables and grid networks, it said.

In the case of copper, the rapid expansion of grid investments in China has been the single largest contributor to demand growth over the past two years. Despite the higher demand, a major supply increase led by China, Indonesia and the Democratic Republic of Congo has lowered prices, especially for battery metals such as lithium, nickel, cobalt and graphite, according to the report.

Investment momentum in critical minerals has also weakened, posing supply risks. Spending grew by just 5 per cent in 2024, down from an increase of 14 per cent in 2023. Exploration activity plateaued in 2024.

The report highlights major risks facing copper markets. With demand set to surge as countries look to expand their electricity networks, the pipeline for current copper mine projects points to a 30 per cent supply deficit by 2035, the report said.

Growing export restrictions could also affect the security of supply: of the energy-related strategic minerals covered by the report, 55 per cent are now subject to some form of export control, it added. "In addition, the scope of restrictive measures is widening to encompass not just raw and refined materials but also processing technologies," the IEA said.