The aim of the energy transition is to move the world to a cleaner, more sustainable future, but the minerals required to produce electric cars, wind turbines and other new energy technologies raise some difficult questions.
While politicians and businesses talk about a greener economy, increasing amounts of minerals are extracted. Mines produced 17.7bn tonnes (t) of minerals in 2018, up from 11.3bn in 2000 and 9.6bn in 1985, shows data from the Austrian government’s latest world mining report.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalData
Mineral requirements are also set to become more complicated as the world attempts to ditch fossil fuels. An average electric vehicle (EV) requires six times the amount of minerals as a conventional car, reports the International Energy Agency (IEA), including materials like nickel, cobalt and lithium that a petrol vehicle typically does not need. An onshore wind plant, meanwhile, needs nine times more mineral resources than a gas-fired plant. The World Bank estimates that demand for metals could increase ten-fold by 2050.
Some minerals are already seeing spikes in demand. Global production of lithium shot up from 18,000t in 2009 to 86,000t in 2019, shows data from the US Geological Survey (USG). By 2030, global EV demands will require a massive 2,700 gigawatt-hours-worth of lithium-ion batteries a year – around 13 times the amount required today, report analysts from Swiss investment bank UBS. The overall lithium market will have grown eight-fold by that same year.
A Tesla Basic Model 3 contains about 10kg of lithium in its battery cells. The 86,000t of lithium mined in 2019 is equivalent to 8.6 million cars, but there are 1.4 billion cars on the road globally, and the IEA’s Net Zero 2050 Roadmap anticipates that 20% of cars will be electric by 2030, and 86% by 2050.
To meet this demand, the world will need to massively step up lithium production. There is no shortage of lithium in the Earth’s crust. In 2020, 86 million tonnes of lithium resources were identified, equivalent to the needs of 8.6 billion cars, reports the UGS. However, converting reserves into usable metal is not simple. Opening mines is an expensive, time-intensive process. It takes 16.5 years on average to move mining projects from discovery to first production, estimates the IEA.
A crash in lithium prices between 2018 and 2019 also severely damaged investor confidence, say commodities experts S&P Global Platts, slowing investment in new mining capacity.
“At current production levels for key battery metals – namely lithium, cobalt and nickel sulphate – the market is headed towards a supply deficit as soon as 2025,” says Scott Yarham, battery metals team lead at Platts. However, prices and investment are already picking back up. “Positive prices have reinstalled confidence, resulting in investments in Q1 [2021] dwarfing the total seen for the whole of last year,” says Yarham.
Plenty of minerals
It can be easy to look at the scale of mineral requirements for the energy transition and take fright. However, evidence suggests it is highly unlikely the world will run out of any mineral.
As long as commodities have been traded, analysts have underestimated the size of reserves. “People in the industry are not worried about minerals running out,” says David Bo, a Beijing-based author, resources expert and director at the Fujian Province-based Zijin Mining Group. “The commodity business is cyclic. Mines open and close and ramp up or slow down production depending on prices. Demand and supply never perfectly match or they always mismatch. That is the reason there is volatility in pretty much the price of every commodity, but that does not mean we are running out of supplies.”
As demand for minerals grows, so do efforts to try and source more of them and bring them to market. This means that known reserves tend to increase as demand increases. The USG said in 1930 that there were around 80 million tonnes of copper in known reserves, but by 1980, this had grown to 350 million tonnes, and by 2020 the figure was at 870 million tonnes.
Nevertheless, “there will be bottlenecks, as with all rapidly growing sources of demand”, says Kingsmill Bond from think tank the Carbon Tracker Initiative. “[But] prices will go up. And supply will be built. And the bottleneck will be solved.”
If conventional mineral deposits were to run dry, there are other sources that humans have barely begun to consider. The deep seabed contains vast amounts of minerals, including polymetallic nodules that present a readily available supply of iron, copper, cobalt, nickel and rare earth elements. Other routes to sourcing new minerals include reprocessing and re-mining from abandoned pits or waste materials from old mines, as well as mining for materials in space.
[Keep up with Energy Monitor: Subscribe to our weekly newsletter]
Mining can be very damaging to the environment, however, and the full extent of the damage that would be caused to delicate ecosystems like the deep sea is unknown. A 2020 report from Greenpeace warned that deep sea mining could cause “irreversible damage” to the ocean, and disrupt the natural processes that make the sea a carbon sink.
Increased levels of recycling will help shore up supply chains and also limit the environmental impact of mining. Recycling also saves energy. Recycling copper “saves 85% of the energy needed for primary production”, says industry group the Copper Alliance.
Up to 80% of all metals ever produced are still available for use, says lobby group Metal Packaging Europe. While 82.5% of steel packaging and 76.1% of aluminium beverage cans are recycled in Europe, EU lithium-ion recycling rates are at less than 5%. Global recycling rates for rare earth metals, crucial to electronic devices, are at 1–2%, says Richard Wouters from think tank the Green European Foundation.
Before more stringent regulation comes into place, “the problem with recycling is that secondary materials are sometimes more expensive than primary materials”, says Wouters. Countries with large shares of the production market of certain minerals can control supply to ensure this remains the case.
This economic problem is set to change in Europe, with new regulations in support of the European Commission’s Circular Economy Action Plan aimed at helping the continent reach net-zero emissions by 2050. In February 2021, the European Parliament backed the introduction of quotas for recycled metal content in new batteries.
“Lithium demand increases will slow by the mid-2020s by tightening circular economy regulation that will require much more recycling,” anticipates Henning Gloystein from the Eurasia Group, a political risk consultancy.
Changing consumer behaviour will also help control future demand for resources, Wouters adds. “If when we do away with fossil fuel cars, we replace five fossil fuel cars with one shared EV, we need only a fifth of the lithium and cobalt that the European Commission currently anticipates we will need for EVs,” he says.
“The consumer economy is the enemy of the green economy,” adds US-based mining consultant Jack Lifton. “We need to stop encouraging people to change products whenever they get bored of them. If we tackle that, issues around critical resources will be mitigated.”
Securing supply chains
Beyond ensuring sufficient quantities of minerals are available, manufacturers need to make sure they have reliable supply chains that can bring those supplies to the factory floor. Western governments and businesses are increasingly concerned China has too much control over those supply chains.
China is Europe’s main supplier for ten out of 30 critical raw materials. The emerging superpower is the world’s leading mining nation (producing just over 4bn tonnes of minerals in 2018, shows data from the Austrian Government) and its control over global minerals goes far beyond its own mineral output.
“China is not rich in lithium, cobalt or nickel resources,” says Platts’ Yarham. However, these metals are “procured by China and refined internally. These are then either consumed in domestic battery production or exported to other key battery-making nations such as Korea and Japan”.
China “controls an estimated 80% of the lithium battery chemical market,” says Jeremy Wrathall from Cornish Lithium, a UK-based mining company. This state of affairs is a “real risk for battery manufacturers around the world,” he believes. The world’s largest lithium mining company, Jiangxi Ganfeng Lithium, is based in Xinyu, China, despite holding all its resources in Australia, Argentina and Mexico.
While the world may be unlikely to run out of minerals, supply chain bottlenecks could lead China to limit exports to protect its own industry. The world received a taste of what this could be like in 2010, when China reduced by 40% its export quotas for the 17 periodic elements that make up rare earth metals, over which the country holds a production monopoly.
These metals can be found in thousands of everyday electronic devices, and are also a crucial component of offshore wind technologies, used as permanent magnets to generate electricity in turbines. Some large models require up to two tonnes of rare earth magnets.
Beijing cited environmental reasons for limiting trade, but the Obama administration’s claim the decisions breached protectionism rules was later upheld by the World Trade Organisation.
“The Chinese more or less control whether or not the world goes green because they control the world’s raw material supply chain, which includes rare earths and other metals” says Lifton. “That is a big problem for the West.”
Between 1990 and 2019, China’s production of rare earth elements increased from 30,000t to 140,000t, with the US importing 80% of its rare earths from China in 2019 and the EU a whopping 98%.
Playing catch-up
China can dominate global mineral supplies because it is willing to pursue ventures Western companies might deem to be financially too risky, says Bo. “Western companies are more timid about investing in exploration,” he states. “Western miners have historically not invested in Indonesia [the world’s top nickel producer] because there is a weird rule that if you are a foreign investor you must eventually divest at least 51% to the local buyers. China is not so concerned about this.”
Bo adds: “It is only now that Europe is realising it has a supply chain problem and is playing catch-up – but this transformation is not going to happen overnight.”
Concerns around China’s control of global supplies has triggered an emphatic policy response in the West. The Biden administration has made shoring up supply chains a policy priority. Announcements include the “expansion of the largest rare earth element mining and processing company outside of China” and a forthcoming “national blueprint for lithium batteries”.
The EU is taking similar action. The Commission has a list of 30 critical materials (up from 14 when it was introduced in 2011), which are deemed important to the EU economy and whose supply is seen as high risk.
The Commission is ramping up plans to mine Europe for more critical minerals, as part of its Green Deal. Its 2020 ‘Communication on Critical Raw Materials‘ announced the launch of an industrial alliance committed to securing a sustainable supply of raw materials.
Efforts to shore up supply chains are bearing fruit. Data shows that countries including Australia, Myanmar and the US are now building significant shares in global production. The estimated value of rare earth compounds and metals imported by the US in 2020 was $110m, a significant decrease from $160m in 2019.
Europe’s difficulty
It makes sense for Western countries to want autonomy of supply “because of political tensions” with China, says Bo. However, there is little fundamental risk under normal international trade situations, he believes. “Unless the situation is really, really bad, it is doubtful China would pull the plug. It is not in anyone’s interest.”
China is “extremely sensitive” about maintaining market share, especially now that other countries are ramping up supplies, says Josh Gartland from industry group WindEurope.
Also, despite growing interest in domestic production, recycling and changing consumer demand, it is hard to believe that mining in Europe could ever meet the bloc’s needs. Europe represents around 15.4% of the global market on a purchasing parity basis, but only 5% of global mining in 2020. The continent is the only part of the world with a declining mining industry, with output falling 19% between 2000 and 2018, shows data from the Austrian Government. Rolf Kuby, director of European mining body Euromines, says this decline is due to many factors, insisting the “European investment environment is not optimal”.
Wouters believes Europe should end its near total reliance on China, citing political and ethical differences. “China is not a democracy like us,” he says. “It is a systemic rival promoting an autocratic form of government.” Kuby highlights Europe’s “high social and environmental standards”.
Without subsidies, however, these standards and labour costs make it hard to produce minerals at the same cost and on the same scale as China. “I think Europe as a whole, and especially member states, should think about strategically helping the mining sector,” says Kuby. “Whether that be through a more encouraging policy framework, or subsidies for the opening of mines that would not necessarily be able to compete with mines in other parts of the world.”
China’s rare earths industry has been able to out-price the rest of the world in part due to the country’s relatively lax environmental standards. Processing rare earths has had a devastating impact in parts of the country. Chemicals used to separate low-grade ores create air pollution, cause erosion and leach into groundwater. Reports from the town of Baotou, the centre of rare earths production in Inner Mongolia, describe total crop failure, livestock deaths, and illnesses like diabetes, osteoporosis and chest problems.
China has “never… worked out pollutant discharge standards for the rare earth industry”, says a 2010 report from the Washington-based Institute for the Analysis of Global Security.
In Europe, meanwhile, there have been attempts since 2009 to mine its only large-scale rare earths deposit at Norra Kärr in Sweden. The country’s supreme court initially blocked plans in 2016 due to environmental concerns. The case has reopened as the EU attempts to bolster domestic supply chains, but ongoing worries about the impacts on nature and biodiversity mean the plans are unlikely to advance.
The EU Communication on Critical Minerals admits “it is very difficult to bring new critical raw material projects to the operational stage”, given a “lack of incentives and financing for exploration” and a “lack of public acceptance for mining in Europe”.
The bloc remains reliant on mineral imports from China and elsewhere to drive digital and energy transitions and there are no easy solutions to change this. Businesses in the clean energy sector generally want to limit their environmental impacts where possible – but WindEurope’s Gartland adds that industry might be concerned if overly-ambitious sustainability standards for rare earths and permanent magnets “are introduced too quickly”. This could “limit the availability of permanent magnets available to the wind industry, with the same effect as if China had shut off its ports”, he says.
The best long-term solution is doubtless to reduce demand through behavioural and consumption pattern change. Ultimately, however, the energy transition will include trade-offs. Whatever those trade-offs might be, they are highly unlikely to be as damaging as the world continuing to pursue a fossil fuel-based economy.
Recent analysis from Carbon Tracker’s Kingsmill Bond highlights how, while some analysts fret about the mineral requirements for renewables, the 6.5 tonnes of minerals needed to build 1MW of solar capacity will last for decades, and produce an estimated 40,000 megawatt-hours (MWh) of electricity. By contrast, coal power requires 350kg of coal to generate one MWh. In all, Bond estimates the fossil fuel system requires 300 times more mineral material to function than a renewables system.
