Critical minerals: rising demand, supply risks and the role of recycling

Key minerals like copper, lithium, nickel, cobalt and rare earth elements play a vital role in the rapid expansion of modern energy technologies, including wind turbines, power grids, and electric vehicles. As the shift toward clean energy accelerates, the demand for these resources continues to rise. Different technologies require specific mineral inputs. Lithium, nickel, cobalt, manganese and graphite are fundamental for battery efficiency, while rare earth elements are indispensable for the permanent magnets found in wind turbines and electric vehicle motors. Power grids rely heavily on aluminium and copper, with copper serving as a foundational element for all electricity-related systems. In the coming years, securing a dependable supply of critical minerals will be crucial for maintaining energy system stability. However, significant challenges exist.

The growing challenge of the clean energy transition

IEA – International Energy Agency suggests that the current abundance of these materials, sufficient to meet today’s needs, may not accurately reflect future availability as demand continues to grow. Just as the use of clean energy is expanding, so is the demand for critical minerals. According to the IEA, the demand for minerals for clean energy technologies is expected to double between now and 2030 in a scenario that reflects current policy settings, the stated policy scenario (STEPS), but almost triple by 2030 and quadruple by 2040 in the NZE (Net Zero Emission) scenario, which is, for example, the direction the European Union wants to move in. Lithium sees the fastest growth in demand, due to the increasing demands of electric vehicle batteries. In the NZE scenario, it is expected to increase nine-fold by 2040. In terms of production volume, copper sees by far the largest increase. The demand for graphite almost quadruples by 2040 in the NZE scenario, while the demand for nickel, cobalt and rare earth elements doubles.

The combined market value of key energy transition minerals – copper, lithium, nickel, cobalt, graphite and rare earth elements – more than doubles to reach USD 770 billion by 2040 in the NZE Scenario. At around USD 325 billion, today’s aggregate market value of key energy transition minerals aligns broadly with that of iron ore. 

Supply risks and sustainability challenges

The current level of market concentration for critical minerals is exceptionally high, surpassing that of any other key commodity in the modern economy. Few countries dominate production. A couple of illustrative figures:

• China: a major player across all four minerals, especially in refining. It accounts for 77% of global refined rare earth elements and a significant share of lithium, nickel, and cobalt refining;
• Indonesia: a key supplier of nickel, having increased its share of global refined nickel production significantly in recent years;
• Democratic Republic of the Congo (DRC): the largest supplier of cobalt, responsible for a substantial portion of global production;
• Chile: produces a quarter of the world’s copper (and China refines 45% of it)

But it is not just a question of availability. Most minerals are exposed to high environmental risks and have particularly high ratings for environmental performance for the refining segment in large part because today’s refining operations occur in places with higher carbon intensity of the grid, mostly in regions relying on coal-based electricity. Mining assets are also exposed to growing water stress and earthquake risks, Just one number, for example: 52% of copper mines are located in areas with high water stress, making production vulnerable to climatic factors.

Last but not least: geopolitical and trade fluctuations can affect the stability of supply and prices. It is therefore fundamental for the success of the energy transition to develop resilient and sustainable supply chains for critical minerals, promoting responsible extraction practices, diversifying supply sources and investing in recycling and material substitution.

The role of recycling critical minerals in the energy transition

In the recent IEA report “Recycling of Critical Minerals: Strategies to Scale Up Recycling and Urban Mining”, which analyses the crucial role of recycling critical minerals in the transition to clean energy, it is emphasised that recycling represents a fundamental strategy to reduce dependence on primary extraction and mitigate the negative effects on the environment and local communities. According to the report, the recycling of critical minerals could meet a significant percentage of future demand. In particular, by 2050, recycling could reduce the need for new mining activities by up to 40% for copper and cobalt and 25% for lithium and nickel. However, despite the potential of recycling, the amount of secondary materials currently recovered is not enough to cover the increase in demand. For example, the share of recycled copper decreased from 37% in 2015 to 33% in 2023, while that of nickel fell from 35% to 31% in the same period. One of the main “obstacles” is the long life cycle of some products, such as electric vehicle batteries, which can last up to 15 years before being available for recycling. This means that, in the short term, primary production remains essential to meet demand. However, with the right policies, recycling can (and should) gradually become an increasingly important source of critical minerals.

Challenges and opportunities for the recycling sector

According to the IEA report, despite the environmental and economic advantages, recycling critical minerals presents several challenges:

• Poor infrastructure for recovery and processing: recycling capacity is currently limited in many areas of the world, especially in developing countries;
• Difficulty in recovering materials from complex products: batteries and electronic components contain mixtures of different materials, making recycling more expensive and technically challenging;
• Low collection rates and ineffective disposal: many spent batteries and electronic devices end up in landfill instead of being recycled, resulting in the loss of valuable materials.

On the other hand, improvements in separation and refining technologies, together with stricter regulations on the management of electronic waste, could favour an increase in the proportion of recycled materials. In particular, the adoption of so-called “urban mining” (extraction of materials from electronic waste) and design for recycling practices could facilitate the recovery of precious minerals.

Geopolitical and economic implications of recycling

The recycling of critical minerals is not only an environmental issue, but also a strategic lever for reducing dependence on foreign suppliers. Strengthening recycling capacities in importing countries could reduce this dependence and improve security of supply. Furthermore, the recycling industry could generate new economic opportunities and jobs. Investing in recycling infrastructures and in research into new separation technologies could favour the development of a highly specialised industrial sector, with positive repercussions on the global economy.

Recommendations for the future

The recycling of critical minerals represents a fundamental component of the global energy transition. Although it cannot completely replace mining in the short term, its development can help reduce environmental impact, strengthen security of supply and create new economic opportunities. The main challenge will be to implement adequate policies and infrastructures to make the most of recycling potential and accelerate the transition to a more sustainable and resilient economy.

(by Maria Luisa Doldi)