CRITICAL MINERAL PERSPECTIVES occurrence and production of mineral raw material - insights
Bass Hatvani Robert
CHIEF MAGNET IN BUSINESS ARCHITECTURE at SSR - STRATEGIC SUPPLY CHAIN REDUNDANCY
The Role of Critical Minerals in Clean Energy Transitions
An energy system powered by clean energy technologies differs profoundly from one fuelled by traditional hydrocarbon resources. Building solar photovoltaic (PV) plants, wind farms and electric vehicles (EVs) generally requires more minerals than their fossil fuel- based counterparts.
A typical electric car requires six times the mineral inputs of a conventional car, and an onshore wind plant requires nine times more mineral resources than a gas-fired power plant. Since 2010, the average amount of minerals needed for a new unit of power generation capacity has increased by 50% as the share of renewables has risen.
The types of mineral resources used vary by technology. Lithium, nickel, cobalt, manganese and graphite are crucial to battery performance, longevity and energy density. Rare earth elements are essential for permanent magnets that are vital for wind turbines and EV motors. Electricity networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-related technologies.
The shift to a clean energy system is set to drive a huge increase in the requirements for these minerals, meaning that the energy sector is emerging as a major force in mineral markets. Until the mid-2010s, the energy sector represented a small part of total demand for most minerals. However, as energy transitions gather pace, clean energy technologies are becoming the fastest-growing segment of demand.
In a scenario that meets the Paris Agreement goals, clean energy technologies’ share of total demand rises significantly over the next two decades to over 40% for copper and rare earth elements, 60-70% for nickel and cobalt, and almost 90% for lithium. EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040.
As countries accelerate their efforts to reduce emissions, they also need to make sure their energy systems remain resilient and secure. Today’s international energy security mechanisms are designed to provide insurance against the risks of disruptions or price spikes in supplies of hydrocarbons, particularly oil.
Minerals offer a different and distinct set of challenges, but their rising importance in a decarbonising energy system requires energy policy makers to expand their horizons and consider potential new vulnerabilities. Concerns about price volatility and security of supply do not disappear in an electrified, renewables-rich energy system.
Clean energy transitions will have far-reaching consequences for metals and mining
The bottom-up assessment suggests that a concerted effort to reach the goals of the Paris Agreement (climate stabilisation at “well below 2°C global temperature rise”, as in the IEA Sustainable Development Scenario [SDS]) would mean a quadrupling of mineral requirements for clean energy technologies by 2040. An even faster transition, to hit net-zero globally by 2050, would require six times more mineral inputs in 2040 than today.
Which sectors do these increases come from? In climate-driven scenarios, mineral demand for use in EVs and battery storage is a major force, growing at least thirty times to 2040. Lithium sees the fastest growth, with demand growing by over 40 times in the SDS by 2040, followed by graphite, cobalt and nickel (around 20-25 times). The expansion of electricity networks means that copper demand for power lines more than doubles over the same period.
The rise of low-carbon power generation to meet climate goals also means a tripling of mineral demand from this sector by 2040. Wind takes the lead, bolstered by material-intensive offshore wind. Solar PV follows closely, due to the sheer volume of capacity that is added.
Hydropower, biomass and nuclear make only minor contributions given their comparatively low mineral requirements. In other sectors, the rapid growth of hydrogen as an energy carrier underpins major growth in demand for nickel and zirconium for electrolysers, and for platinum-group metals for fuel cells.
Demand trajectories are subject to large technology and policy uncertainties. We analysed 11 alternative cases to understand the impacts. For example, cobalt demand could be anything from 6 to 30 times higher than today’s levels depending on assumptions about the evolution of battery chemistry and climate policies. Likewise rare earth elements may see three to seven times higher demand in 2040 than today, depending on the choice of wind turbines and the strength of policy support.
The largest source of demand variability comes from uncertainty around the stringency of climate policies. The big question for suppliers is whether the world is really heading for a scenario consistent with the Paris Agreement. Policy makers have a crucial role in narrowing this uncertainty by making clear their ambitions and turning targets into actions. This will be vital to reduce investment risks and ensure adequate flow of capital to new projects.
Clean energy transitions offer opportunities and challenges for companies that produce minerals. Today revenue from coal production is ten times larger than those from energy transition minerals. However, there is a rapid reversal of fortunes in a climate-driven scenario, as the combined revenues from energy transition minerals overtake those from coal well before 2040.
Critical raw materials as defined by the EU (EU Commission 2010) are: antimony, beryllium, fluorite, gallium, germanium, graphite, indium, cobalt, magnesium, niobium, platinum group elements (iridium, osmium, palladium, platinum, rhodium, ruthenium), rare earths , Tantalum and tungsten.
The appendix gives an overview of production, reserves and resources in Table 5, if available.
Evaluation of the net production of aluminum
For aluminum, bauxite has to be converted into aluminum content, which leads to problems with the conversion to aluminum due to different Al2O3 contents. Furthermore, although a large part, but not the complete bauxite is processed into aluminum. For simplicity, a conversion factor of 0.2 was assumed for bauxite to aluminum.
Nevertheless, the aluminum production calculated from bauxite extraction plus recycling is a total of 9.4 million t above consumption, which is higher than the actual overproduction, which was around 1 million t in 2010.
Income Classes (EC) of the World Bank
The World Bank regularly publishes data for all countries on the annual average income per capita and differentiates it as a measure of the economic development of a country's so-called income class (World Bank 2013/2).
These are broken down as follows: lower income class (less than $ 1,035 per year per resident), middle income class (between $ 1,036 and $ 12,615 per year per resident) and high income class (over $ 12,616 per year per resident).
Governance Indicator (WGI)
The combined governance indicator was calculated as an average of the individual WGIs indicators issued by the World Bank (WORLD BANK 2013c).
The individual indicators are - The indicators range from -2.5 to +2.5.
Export goods groups for foreign trade
The following foreign trade export groups (SITC, Rev. 4, 2006) were included according to the International List of Goods:
Herfindahl-Hirschman Index
The Herfindahl-Hirschman Index (HHI) is a measure of concentration in a market. In antitrust law, the index is used to prove the dominant position of providers. It is calculated by summing the squared market shares (in%) of all competitors.
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World rank (by value of all commodities in US $) in the various categories reserves, resources, mine production and refinery production as well as the sum of placements.
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Ranking of countries in terms of net imports of Germany in the categories reserves, resources, mine production and refinery production, as well as the sum of the placements
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Overview of the countries where the commodity sector is of high (green) or medium (blue) importance, with the share of mining and refinery production in GDP and exports, governance indicator (WGI) and income class of countries by World Bank and Information on the number of raw materials recovered and the share of value of the most important raw material in the total mine production of the country.
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Critical raw materials: Countries with production, reserves and resources of critical raw materials> 1%. Sorted in order production before reserves before resources. Figures in%.
Figure 1: Countries * with a share of> 1% in mining production (2010).
Figure 2: Countries * with a share> 1% of the reserves (2010).
Figure 3: Countries * accounting for> 1% of resources (2010).
Figure 4: Countries * with a share of> 1% in refined sugar production (2010).