How critical materials industry can mitigate risks: IRENA

Select materials

Enhanced investment in research and development can help mitigate geopolitical risks associated with critical materials, according to a research note from the International Renewable Energy Agency (IRENA).

The report suggests that increased investment would expedite the development of alternative solutions, improve efficiency, and expand recycling and repurposing options. The report was authored under the guidance of Elizabeth Press (Director, IRENA Planning and Programme Support) by Thijs Van de Graaf (IRENA consultant and lead author), Martina Lyons, Isaac Elizondo Garcia, Ellipse Rath (IRENA) and Benjamin Gibson (ex-IRENA).

The mining and processing of critical materials are currently concentrated in a select group of countries, creating vulnerabilities in the global supply chain. Australia dominates in lithium mining, while Chile leads in copper and lithium. China has a stronghold in graphite and rare earths, the Democratic Republic of Congo in cobalt, Indonesia in nickel, and South Africa in platinum and iridium. This concentration becomes even more pronounced during the processing stage, with China accounting for a significant portion of the refined supply of natural graphite, dysprosium, cobalt, lithium, and manganese.
Value of exports of selected commodities in 2021IRENA emphasizes the importance of carefully assessing the effects of surging demand for critical materials across all economic sectors, aligning with net-zero strategies. Currently, most demand for these materials comes from sectors unrelated to the energy transition, such as electronics, aviation, defense, healthcare, and steel and aluminum production. However, the demand landscape is rapidly evolving with the deployment of renewable energy technologies, batteries, and electric vehicles. The modernization and expansion of grids also contribute to increased material use. To avoid competition between sectors and industries, it is crucial to monitor how the growing demand for energy-related materials will impact overall demand and explore potential trade-offs and strategies.

As establishing new mines and processing plants involves extensive lead times, concentrated supply chains are expected to persist in the near future. However, countries should aim to develop dual strategies to ensure cooperation in keeping markets functioning while simultaneously diversifying supply chains in the long term. Many initiatives at bilateral, regional, and industry levels are addressing supply chain challenges, and these efforts can be leveraged for coordinated policy action. IRENA’s Collaborative Framework for Critical Materials serves as a global platform for exchanging knowledge, sharing best practices, and coordinating actions to sustain an accelerated energy transition using minerals and materials.
Market share of mining cos in select materialsThe research note also highlights the varying importance and criticality assessments of different materials for the energy transition. Innovation has led to the increased use of substitute materials for those considered critical, such as neodymium, copper, and lithium. Policy makers are encouraged to foster innovation to decrease dependency on specific materials and address specific challenges throughout the supply and demand chains. Regular revisions and evaluations of critical material lists are necessary due to the rapid pace of innovations in production.

To prevent major supply challenges leading up to 2050, the research note suggests several strategies with a focus on the current decade. Key among these strategies are product design approaches that minimize the use of critical materials and promote the recycling and reuse of products to recover scarce materials. Promising trends have been observed, such as battery manufacturers reducing their reliance on critical material supplies. Policy makers are encouraged to support innovations that reduce demand and foster a circular economy to ensure long-term material security.

The research note highlights the importance of collecting detailed information and data on reserves, production, investment, and pricing to track current supply and increase market transparency. The adoption of international quality standards and certification for products involving critical materials can facilitate market formation. Additionally, the development and regular updating of demand scenarios are recommended to provide better visibility into potential supply gaps and the impacts of innovation. Short-term policy actions, including stockpiling, should be carefully assessed to avoid unintended consequences on climate action.

Furthermore, the diversification of supply chains should include a strategy for trade and cooperation between developed and developing countries. A balanced and cooperative foreign policy approach requires importing states to support industrial development in developing countries beyond extractive patterns in critical material supply chains. This involves fostering partnerships, including with the private sector, advocating responsible sourcing practices, supporting capacity building in producing countries, promoting transparency and accountability, and investing in sustainable initiatives. Implementing these steps can contribute to equitable and sustainable development, ensuring a more inclusive and mutually beneficial approach to procuring critical materials while securing the long-term resilience of material supply chains.

The research note concludes by highlighting the opportunity presented by the energy-driven mineral boom to redefine the legacy of the extractive industry. Addressing known issues surrounding mining practices requires proactive responses from nations and corporations alike. Importer and exporter countries must collaborate to develop supply chains that adhere to clear standards concerning human rights, environmental concerns, and community engagement. These standards are crucial for human security, and their absence is identified as one of the root causes of geopolitical instability. Mining corporations should be held accountable for the responsible management of extraction processes. This requires engaging in inclusive dialogues that encompass the fair distribution of risks, inputs, creative contributions, and resulting value. A global effort under the auspices of the United Nations is suggested to play a key role in ensuring that critical material value chains are fair, equitable, and transparent.