Electric car sales increased by 60% in 2022, exceeding 10 million units. Energy storage systems experienced even more rapid growth, with capacity additions doubling in 2022. Solar PV installations continue to shatter previous records, and wind power is set to resume its upward march after two subdued years. This has led to a significant increase in demand for critical minerals. From 2017 to 2022, demand from the energy sector was the main factor behind a tripling in overall demand for lithium, a 70% jump in demand for cobalt, and a 40% rise in demand for nickel. In 2022, the share of clean energy applications in total demand reached 56% for lithium, 40% for cobalt and 16% for nickel, up from 30%, 17% and 6%, respectively, five years ago.

Driven by rising demand and high prices, the market size of key energy transition minerals doubled over the past five years, reaching USD 320 billion in 2022, broadly similar to the market size for iron ore mining. This rapid growth contrasts with the modest growth of bulk materials like zinc and lead. As a result, energy transition minerals, which used to be a small segment of the market, are now moving to centre stage in the mining and metals industry. This brings new revenue opportunities for the industry, creates jobs for the society, and in some cases helps diversify economies dependent on coal.

Many critical minerals experienced broad-based price increases in 2021 and early 2022, accompanied by strong volatility, particularly for nickel and lithium. Most prices began to moderate in the latter half of 2022 and into 2023 but remain well above historical averages. Higher or volatile mineral prices during 2021 and 2022 highlighted the importance of material prices in the costs of transforming our energy systems. According to the IEA’s clean energy equipment price index, clean energy technology costs continued to decline until the end of 2020 due to technology innovation and economies of scale, but high material prices then reversed this decade-long trend. Despite these recent setbacks, it is noteworthy that the prices of all clean energy technologies today are significantly lower than a decade ago.

There is growing recognition that policy interventions are needed to ensure adequate and sustainable mineral supplies and the proliferation of such initiatives includes the European Union’s Critical Raw Materials (CRM) Act, the US’s Inflation Reduction Act, Australia’s Critical Minerals Strategy and Canada’s Critical Minerals Strategy, among others. The IEA Critical Minerals Policy Tracker identified nearly 200 policies and regulations across the globe, with over 100 of these enacted in the past few years. Many of these interventions have implications for trade and investment, and some have included restrictions on import or export. Among resource-rich countries, Indonesia, Namibia and Zimbabwe have introduced measures to ban the export of unbeneficiated mineral ore. Globally export restrictions on critical raw materials have seen a fivefold increase since 2009.

Our detailed analysis of the investment levels of 20 large mining companies with a significant presence in developing energy transition minerals shows a strong rise in capital expenditure on critical minerals, spurred by the robust momentum behind clean energy deployment. Companies specialising in lithium development recorded a 50% increase in spending, followed by those focusing on copper and nickel. Companies based in China nearly doubled their investment spending in 2022.

Canada and Australia led the way with over 40% growth year-on-year, notably in hard-rock lithium plays. Exploration activities are also expanding in Africa and Brazil. Lithium stood out as a clear leader in exploration activities, with spending increasing by 90%. Uranium also experienced a significant surge in spending by 60% due to renewed interest in nuclear power amid concerns over Russian supplies. Nickel was a close follower with a 45% growth rate for exploration, led by Canada where high-grade sulphide resources, proximity to existing infrastructure and access to low-emissions electricity create attractive investment opportunities.

The 160% year-on-year increase took the critical minerals category to 4% of all venture capital (VC) funding for clean energy. The first quarter of 2023 has been strong for critical minerals, despite a severe downturn in other VC segments, such as digital start-ups. Battery recycling was the largest recipient of VC funding, followed by lithium extraction and refining technologies. Companies based in the United States raised most of the funds, at 45% of the total between 2018 and 2022. Canadian and Chinese start-ups are notably active in battery recycling and lithium refining. European start-ups have been successful at raising money for rare earth elements, battery reuse and battery material supply.

Global battery demand for clean energy applications increased by two-thirds in 2022, with energy storage becoming a growing part of the total demand. Demand for batteries in vehicles outpaced the growth rate of electric car sales as the average battery size for electric cars continued to rise in nearly every major market. The trend of favouring larger vehicles seen in conventional car markets is being replicated in the EV market, posing additional pressure on critical mineral supply chains.

Cathode chemistry choices are bifurcating towards high-nickel or lithium-iron phosphate chemistry while anodes see a growing adoption of silicon-doped graphite. Sodium-ion batteries witnessed a leap forward in early 2023, with plans for production capacity exceeding 100 GWh, primarily concentrated in China. Initially, companies are targeting less demanding applications such as stationary storage or micromobility for this technology, and it remains to be seen if it will be able to meet the needs for EV range and charging time.

Today, the vast majority of recycling capacity is located in China, but new facilities are being developed in Europe and the United States. Scrap from manufacturing processes is dominating today’s recycling pool, but this is set to change from around 2030 as used EV batteries reach the end of their first life.

Long-term offtake agreements have become the norm in the industry’s procurement strategies, but companies are taking extra steps to invest directly in the critical minerals value chain such as mining, refining and precursor materials. Since 2021, there has been a notable increase in direct investment activities. Contemporary Amperex Technology Co., Limited, the world’s largest battery cell maker, has made the acquisition of critical mineral assets a central element of its strategy. Other examples include General Motors’ USD 650 million investment in Lithium Americas and Tesla’s plan to build a new lithium refinery in the United States, among others.