Low price levels are not a sign of an all-clear.
Last year, the International Energy Agency (IEA) presented its first market report on the raw materials required for the global energy transition. The latest version of the report was published today, Friday. It states that the prices for many critical minerals – especially those used to manufacture batteries – will have returned to pre-pandemic levels in 2023. According to the IEA, this may sound good at first, but it could mask the risk of supply bottlenecks, as the demand for resources for the energy transition is growing: the total market is likely to more than double to 770 billion US dollars by 2040 if climate targets are to be met. However, falling prices are making new mining projects less attractive for investors. Given the long lead time, this shifts the risk of insufficient supply. Continuous investment is necessary to prevent this in the medium and long term.
In the case of rare earths, the financing of new projects has increased despite the fall in prices. According to the agency, the geographically very concentrated extraction would be put on a broader footing through new mines outside China. However, further processing would remain limited to just a few market participants. Of all the minerals that are important for the energy transition, rare earths used to manufacture magnets are at the greatest risk of geographic concentration of their processing. These include neodymium and terbium.
The full report can be found here.
Photo: dannyfroese via Canva
