China joins global hunt to diversify mineral supplies: IEA

TOKYO — China’s dominant position in refining and processing raw materials is making the nation a strong competitor in the global fight for mining assets, the International Energy Agency said on Tuesday, as governments and companies rush to diversify supply chains for critical minerals and stably meet demand for key clean technologies including renewables and electric vehicle batteries.

“As the world’s largest metal refining hub, China heavily relies on imports for large volumes of raw materials, often from a small number of sources,” the IEA’s Critical Minerals Market Review 2023 report said.

The world’s second-largest economy is the top producer of processed copper, cobalt, lithium, graphite and rare earths and the second-largest processor of nickel, after Indonesia, but its sources for raw materials are highly concentrated, according to the report. It relies almost entirely on the Democratic Republic of Congo for importing unprocessed cobalt, on the Philippines and Myanmar for around 80% of its nickel and tin, respectively, and on Australia for 60% of its lithium.

“China is therefore seeking ways to diversify its raw material supply portfolio,” the report said. “The country has been actively investing in mining assets in Africa and Latin America, and started investing in overseas refining and downstream facilities, with an aim to secure strategic access to raw materials.”

Regarding lithium, for example, between 2018 and the first half of 2021, Chinese companies invested $4.3 billion in mining assets, twice the amount of American, Australian and Canadian businesses combined, the report said.

The IEA expects China to further increase investment in overseas mining assets and trigger “greater competition” for various sources as the energy sector drives demand.

A number of other countries also are aiming to diversify supplies and coming up with new policies to do so, the report said, citing, for example, the European Union’s Critical Raw Materials Act, the Inflation Reduction Act in the U.S. and strategies by Australia, Canada and others.

“Many of these interventions have implications for trade and investment, and some have included restrictions on import or export,” the report said. “Among resource-rich countries, Indonesia, Namibia and Zimbabwe have introduced measures to ban the export of unprocessed mineral ore. Globally, export restrictions on critical raw materials have seen a fivefold increase since 2009.”

The report welcomed the fast expansion in market size, investment and exploration spending for lithium, nickel and other minerals crucial in supporting the energy transition away from carbon-based resources. It also assessed as positive moderation in prices after volatility and spikes since 2021, although it stressed the need for more stability to advance affordability.

“We are encouraged by the rapid growth in the market for critical minerals, which are crucial for the world to achieve its energy and climate goals,” IEA Executive Director Fatih Birol said in a news release accompanying the report. But he added that “major challenges” remain and “much more needs to be done to ensure supply chains for critical minerals are secure and sustainable.”

Once a “small segment” of the market, minerals used in the energy transition are now “moving to centre stage” in the mining and metals industry, the report said. From 2017 to 2022, demand for lithium, cobalt and nickel rose 200%, 70% and 40%, respectively, driven by demand from the energy sector.

Combined market size for the key minerals — copper, lithium, nickel, cobalt and graphite — doubled over the past five years to $320 billion. Copper increased 1.5 times to nearly $200 billion, while lithium grew nearly sevenfold and the nickel market size tripled.

Investment in development of critical minerals rose 30% in 2022, following a 20% increase in 2021. Spending by companies specializing in lithium development marked the highest increase, at 50%, followed by those focusing on copper and nickel development. Exploration spending rose 20%, also driven most by lithium, then copper and nickel.

While the report said planned increases in supplies could be enough to meet demand projected from national climate pledges that governments have announced so far, more projects will be needed by 2030 if the world is to transition to clean energy, as needed to limit a rise in global temperatures to 1.5 degrees Celsius.