Unearthing the Tomorrow: Are Critical Minerals “Fuelling” the Next Industrial Revolution?
Shree Priya Thakur | 13 May 2024
Summary
Critical minerals such as copper, nickel, lithium, REMs, etc., are recognised as the new fuel powering the Green Transition, essential for green technologies like electric vehicles and solar power grids.
Their cartographic limitation to a few countries is altering the geopolitical balance of power, as demand is expected to surge by 2040 (IEA). This shift can empower developing nations and facilitate a dominant presence in China, which currently controls 60% of all critical mineral production and 85% of all mineral processing.
Despite challenges, strategies to diversify supply chains, reduce dependencies, and secure resilient partnerships are underway as several nations are drafting legislation to safeguard their demand for critical minerals.
Critical Minerals
Critical Minerals are increasingly being recognised as the new “oil” ushering in the Next Industrial Revolution, i.e. The Green Transition. Critical minerals like lithium, cobalt, nickel, copper, and Rare Earth Minerals (REMs) are essential components in several renewable energy technologies such as electric vehicles, EV batteries, solar power grids, and more. They are indispensable in the current Green Transition shift, premised on an electrified future.
Minerals like copper, lithium, and REMs play an “elemental” role in manufacturing renewable energy infrastructure. Copper, for example, is fundamental for electrical wiring, while lithium-powered batteries are central to the “energy storage revolution. REMs, too, are crucial for motors that drive Electric Vehicles (EVs) and wind turbines. As we transition to renewable energy sources and electrification of transport, the demand for these minerals is surging. This results in a seismic shift, reshaping the economic and geopolitical interface by potentially redistributing global power towards countries in the “Global South” possessing these valuable resources.
Emerging Issues & Dependence on Critical Minerals
The systemic change introduced by the rise of critical minerals has brought several challenges, unveiling the faultlines of global dependency.
Firstly, the International Energy Agency recently highlighted that critical minerals like nickel, cobalt, and lithium will see a dramatic increase in demand by 2040, courtesy of the green energy transition. This surge can result in a demand-supply mismatch, posing significant risks to the supply chains and the concentrated nature of mineral processing limited to a few countries.
Furthermore, Sino Capitalism is predicated on supply chain capabilities, and the processing of REMs is causing geopolitical shifts. China currently dominates the market of processing many critical minerals, controlling approximately 90% of rare earths and almost 100% of graphite, along with significant portions of lithium and cobalt processing. The presence of these resources in developing nations like Indonesia (the world’s largest nickel producer), Chile (lithium) and the Democratic Republic of Congo (global leader for cobalt) has tilted the geopolitical leverage axis. For example, Indonesia in 2019 banned the export of raw nickel while DRC designated cobalt as a “strategic resource” to earn higher royalties, illustrating their potential.
Lastly, environmental and social impacts resulting from extracting and processing critical minerals have raised concerns about “neo-extractivism” and the “Scramble for Africa.” Countries rich in these resources may face challenges similar to the “resource curse,” as evident in oil-rich nations.
Policies & Innovations
Despite these challenges, several strategic steps are underway to ensure a smooth transition. For instance, nations and corporations are looking to diversify their sources of critical minerals. The United States and the EU have signed deals with Zambia and DRC to ensure a more reliable mineral supply chain, whereas China embarks on a “minerals for infrastructure” trade deal. Additionally, critical minerals are making their way into policy documents. G7’s discussion in Hiroshima highlighted the necessity of essential minerals; India’s newfound lithium reserves made global headlines while the EU passed a Critical Raw Materials Act. The need for international cooperation and regulation is acknowledged as the World Economic Forum’s recent report highlights that concerns around critical minerals are often exaggerated.
As the world pivots towards a greener future, critical minerals are becoming the new “oil”. However, the nature of the current revolution has both environmental, geopolitical, and ethical dimensions. Addressing these complexities will be crucial in harnessing the full potential of critical minerals and unearthing the new tomorrow.
USGS
Forecast
Short-term
Highly likely that, unlike oil, critical minerals will not experience demand stability as the need for cobalt, nickel, and lithium will see a period of significant boom and bust alongside price volatility, as evidenced in the post-Covid recovery phase in 2021.
Long-term
Strong likelihood that alternative technologies not dependent on the availability of critical minerals will be developed, such as advancements in battery chemistry, reducing the reliance on lithium, thereby alleviating supply pressure. Furthermore, it is highly likely that there will be an expansion of extraction activities. However, there is optimism that countries like Namibia, South Africa and Venezuela will first prioritise domestic considerations over exports.
