High stakes of energy-related critical minerals

With commitments made at the 2023 COP28 Climate Change Conference in Dubai to triple renewable energy production and the surging popularity of electric vehicles, the demand for minerals such as cobalt, copper, lithium, nickel, and rare earths has skyrocketed.

Over the past two decades, the trade in unprocessed critical minerals has experienced an unprecedented surge, with an average annual growth rate of 10%, according to a report from the World Trade Organisation. In 2021, following the slump induced by Covid-19, trade bounced back with a 37% increase on pre-pandemic levels, underscoring the resilience of this market. The value of imports nearly doubled from $212 billion in 2017 to $378 billion in 2022. This surge is particularly pronounced in platinum group metals (PGM), and helium and lithium, with growth rates reaching up to 72% and 53%, respectively.

“Critical minerals, such as cobalt, copper, lithium, nickel and rare earths, play a crucial role in the production of clean energy technologies, from wind turbines to electric cars,” said the report. “Over the past 20 years, annual trade in energy-related critical minerals has increased from $53 billion to $378 billion.

Critical minerals are particularly important for the production of batteries for electric cars, with each battery requiring as much as 200kg of critical minerals. “The battery sector is responsible for 70% of the global demand for cobalt. It also requires aluminium, copper, lithium, nickel and rare earths,” said the report. Additionally, electrolysers — crucial for green hydrogen production — rely on a variety of critical minerals, including platinum and iridium, two of the world’s rarest and most expensive metals, while rare earth elements are needed for magnets, a vital component in many electrical machines.

Global spread

Report authors Monia Snoussi-Mimouni and Sandra Avérous noted that China, with 33% share of demand, stood as the largest importer of critical minerals in 2022, followed by the European Union at 16%, and Japan and the US, both at 11%. They state that this geographical distribution is crucial for understanding the dynamics of the global critical minerals trade. China’s dominance in copper imports and the European Union’s lead in PGM, rare earths, and other minerals underscore the interconnectedness of global supply chains.

The significance of these metals in traditional industries has led to sustained demand.

Imports of copper have seen an average annual increase of 15% since 2002, with a 12% increase in the last five years. “This growth is largely due to an increase in commodity prices and increased imports of two major importers, China and Japan,” said the report. China’s imports have grown by 24% since 2002, while Japan’s imports have seen an average annual increase of 10%. “Together, these two economies constitute about 72% of world copper imports, with China alone representing nearly 60%. “However, in 2022, this upward trend was not maintained, with a slight decrease in growth for major importers of copper.”

The report also highlights the emergence of rhodium and palladium as key players, accounting for 30% of the world total in 2021 and 22% in 2022. The sixfold increase in the value of rhodium imports between 2019 and 2021 underscores the evolving nature of the critical minerals market. “Similarly, imports of helium and lithium recorded a sixfold rise in value in 2022 compared to 2019,” said the report.

Exporting prowess

Chile emerges as the leading exporter of critical minerals, contributing to 11% of global exports in 2022, followed closely by South Africa at 10%. The report identifies South Africa as the primary exporter of PGM, rare earths, and other minerals, while Chile dominates the copper market, accounting for over one-quarter of global exports. These export dynamics highlight the strategic positions of key countries in ensuring the global supply of critical minerals.

The average growth rate over the last five years has been 9%, more than doubling in value since 2016.

The report warned that data on unprocessed minerals needs to be considered in conjunction with information on extraction and processing. “According to the International Energy Agency, approximately 70% of worldwide graphite extraction and close to 100% of processed graphite production takes place in China. Consequently, only the remaining 30% of worldwide graphite is internationally traded, and graphite import and export data covers only 30% of the world’s unprocessed graphite.”

The report also warned about the impact of import and export tariffs and export restrictions on the global supply of critical minerals. The Organisation for Economic Co-operation and Development database reveals an upward trend of export restrictions on energy-related raw minerals, with the number of export restrictions, including export tariffs, increasing from 396 measures in 2009, to 472 measures in 2012, to 489 measures in 2017, to 502 in 2021.

“Special efforts will be needed to diversify the availability of critical minerals in the future to respond to this growing demand. Open trade can be an important element in the collective effort to support a sustainable transition to a low-carbon economy,” concluded the report.
Source: Baltic Exchange