The International Energy Agency projects a massive demand surge for critical minerals by 2040, driven by EVs and clean energy. Significant supply gaps for key materials like copper and lithium are expected to persist for the next decade, posing challenges for global manufacturing and energy transition.
The International Energy Agency has highlighted a looming challenge for the global energy transition: a significant mismatch between the growing demand for critical minerals and available supply. Driven by the expansion of electric vehicles, renewable energy projects, and modern electricity grids, the agency forecasts that demand for essential materials will continue its upward trend through 2040.
Investment Requirements and Supply Gaps
To keep pace with these requirements, the energy body estimates that roughly $750 billion must be invested in mining and refining operations by 2040. Copper remains the most capital-intensive requirement, needing an estimated $310 billion, while nickel follows with a projected $280 billion requirement. Despite new mining projects entering the pipeline, the agency warns that structural deficits for copper and lithium are likely to remain until at least 2035. Cobalt and nickel are also facing tightening supply conditions, influenced by factors such as export limitations and rising consumption in battery technologies.
Refining Concentration and Market Risks
While mining sites are becoming more geographically spread out, the agency points to a concentrated processing bottleneck. A significant portion of the world’s refining capacity for vital minerals remains located in China. The country processes approximately 70% of lithium, 75% of cobalt, and over 90% of battery-grade graphite. This centralization creates a strategic risk, as bottlenecks in processing could delay the availability of finished materials for manufacturers, even if raw material mining increases globally.
The Role of Recycling and Policy
As traditional mining faces long lead times and high capital costs, recycling is being positioned as a necessary secondary supply source. Current projections suggest that recycling could grow to account for nearly 20% of supply by 2040, up from the current 10%. However, this will depend on the implementation of supportive government policies to de-risk investments in local refining and processing plants. For investors, the long-term monitorables include the rate of new mining project commissioning, progress in non-Chinese refining capacity, and the effectiveness of industrial policies aimed at boosting secondary supply from recycling. The persistent supply gap suggests that price volatility for these commodities could remain a theme for industrial companies and manufacturers that depend heavily on these raw materials.