Critical material supply is subject to shocks due to heavily concentrated supply, warned the International Renewable Energy Agency in a report published today.
The Geopolitics of the Energy Transition: Critical Materials examined the geopolitical risks linked to a growing demand for materials in the coming years and calls for a holistic approach to diversify supply chains.
"Today, the mining of critical materials is highly concentrated in specific geographical locations. Australia (lithium), China (graphite, rare earths), Chile (copper and lithium), the Democratic Republic of Congo (cobalt), Indonesia (nickel) and South Africa (platinum, iridium) are the dominant players. Processing is even more geographically concentrated, with China accounting for more than 50% of the world’s refined supply of (natural) graphite, dysprosium (a rare earth), cobalt, lithium, and manganese," wrote the report authors.
The agency noted that company concentration is another problem. The mining industry is dominated by a few major companies, noted the report authors, which can lead to frequently oligopolistic markets."As a result, the industry is highly concentrated, with few controlling a significant portion of global production and trade. The top five mining companies control 61% of lithium output and 56% of cobalt output."
By contrast, critical material reserves are widely distributed, notes the report authors. Developing countries currently account for most of the global production needed for energy transitions, but their share in reserves is even greater.
"For example, Bolivia has 21 million tons of lithium reserves, but produced less than 1% of the world’s supply. An estimated 54% of minerals are located on or near indigenous peoples’ land, underscoring the need for community engagement."
