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S&P Global Commodity Insights
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S&P Global Commodity Insights
A: 28% in India, 5% in the US
B: 47% in India, 2% in the US
C: 30% in India, 7% in the US
D: 25% in India, 10% in the US
A: Australia
B: Chile
C: China
D: United States
Ans: 1984 **HAPPY 40th ANNIVERSARY**
Ans: Gas and power. The conference covered 5 main areas- Strategic, Chemicals, Shipping, Carbon, and Hydrogen.
Critical minerals refer to minerals and metals generally viewed as highly important as inputs for a renewables-based energy transition. They include cobalt, copper, lithium, nickel, graphite, and selected Rare Earth Elements.
Critical minerals have come under intense scrutiny due to their importance in clean energy technology, and hence the energy transition, coupled with concerns about Chinese dominance in their supply chains. A key geopolitical risk currently dictating the critical minerals supply chain agenda is the high level of concentration of production and processing of these minerals in China.
The importance of critical minerals for cleantech and energy transition cannot be overstated.
Copper is present in all the most important cleantech including electric vehicles, solar photovoltaic panels, wind turbines, electricity grids, and hydrogen electrolyzers; and EVs and batteries need every critical mineral.
The cleantech sector is expected to account for a bulk of critical minerals demand growth over the next two decades.
It would not be an exaggeration to say that China's dominance in the critical minerals sector is substantial and difficult to challenge, given its significant size and incumbency advantages.
China is currently the world’s dominant copper refiner, with a 45% market share, which is expected to go up to 50% from 2030 onward, according to the IEA’s 2024 Global Critical Minerals Outlook.
It is the largest lithium refiner, accounting for over 60% of refined lithium products. It has also been making significant efforts to develop domestic mines, with notable investments from downstream manufacturers, such as battery manufacturer CATL. Chinese share of global lithium mining has steadily increased since 2016, from 6% to 17% in 2023.
It accounts for more than 75% of the global refined cobalt supply, 80% of graphite supply currently, and over 90% of refinery battery-grade graphite supply.
In rare earth elements, a set of 17 nearly indistinguishable silvery-white soft metals that are crucial for cleantech equipment performance, China accounts for 62% of global mined production and 92% of global refined REE output.
It is not just Chinese dominance that is of concern, critical minerals production is overall dominated by very few countries. Chile, Peru and the Democratic Republic of Congo (DRC) dominate copper mining; Australia, Chile and China dominate lithium; Indonesia dominates nickel and the DRC dominates cobalt.
Given this concentration of supply, one would have expected more geopolitical risk than we have observed. Oil supply, which is far more diverse (OPEC’s 12 member countries account for only 26% of global supply), has after all been fraught with geopolitical risks.
Critical minerals and oil have notably different demand factors. Economies directly depend on oil and gas for their very functioning, giving countries less bandwidth to respond to shortages and supply disruptions.
By contrast, most critical minerals are used only when new projects are built. A supply disruption could slow these projects down but not grind an economy to a halt. The risk associated with disruptions in the supply of critical materials is less about direct energy security and more about the potential slowdown of energy transitions.
Another differentiating factor with fossil fuels is that minerals can be substituted and recycled.
For example, following the cobalt supply restriction by the DRC in 1978, the substitution possibility of cobalt was taken very seriously leading to its share in permanent magnets dropping from 30% before the crisis to 10% after.
As a combination of heated geopolitical competition overlaps with decarbonization and the fourth industrial revolution, geopolitical risks in critical mineral supply chains are rising.
Beijing in 2023 placed export restrictions on certain types of graphite, and germanium and gallium, which are critical to semiconductor manufacturing, and banned the export of rare earth processing technology in retaliation to US restrictions on the export of AI chips and semiconductor manufacturing equipment to China. In doing so, China demonstrated that it was willing to leverage its dominance in the global critical minerals supply chain to retaliate against trade policies in the West.
There has also been an uptick in resource nationalism in recent years, with numerous governments increasing state control over their mineral resources to enhance the benefits of extraction or address its adverse impacts.
Indonesia banned the export of unprocessed nickel in 2014, mandating their processing domestically to build a downstream industry, spurring economic growth and job creation.
In April 2023, Chilean President Gabriel Boric announced the country’s decision to nationalize its lithium industry.
Contrary to the narrative spun in Washington, London, Brussels, and Tokyo, China’s critical mineral strategy was not originally driven with the intent to weaponize or disrupt supply chains. Of course, Beijing has not helped water down this narrative with its rhetoric around seeking an alternative global order, its activism in Taiwan and the South China Sea, its stance on Russia, and the export restrictions on some minerals in 2023.
China's critical minerals strategy was aimed at addressing internal environmental and economic challenges and achieving its policy goals of leading in high-tech industries, including cleantech.
Environmental protection movements in the US and other countries in the 1970s and 1980s put pressure on rare earth producers, leading to the search for alternative resources and the relocation of production. The liberalization of global trade and investment, especially in China, allowed global companies to establish operations there and Chinese companies to acquire rare earth technology. Consequently, China became the dominant producer of rare earth oxides and gained control over the value chains of certain rare earth applications. China also imported advanced technology and machinery for rare earth processing, supported research and development in the sector, and became a global leader in processing. This gave China a competitive advantage and established it as a global hub for mineral processing.
As the Sino-American rivalry has gotten stronger, it has strengthened Beijing’s focus on indigenizing high-value supply chains to protect its growth and security.
China’s commitment to a green and technological transition as emphasized in the State Council’s “Made in China 2025” blueprint is driving China's increasing demand for critical minerals and makes them indispensable for its national and economic security.
The race for critical minerals is only going to get more intense as the cleantech and fourth industrial revolution pick up pace and in a time of escalating strategic rivalry, the US and its allies are naturally worried about their heavy reliance on China for critical minerals.
Numerous efforts are being made internally, through industrial and trade policies, and externally, by forming alliances, to thwart China’s dominance.
The US IRA includes provisions to promote the extraction of critical minerals by offering production credits. The IRA also establishes a target for the domestic sourcing of critical minerals in EV batteries.
The European Commission’s Critical Raw Materials Act aims to strengthen the EU’s capacities along all stages of the value chain, including extraction, processing, and recycling; diversifying external supply; strengthening the EU’s capacity to monitor and mitigate supply risks; and increasing the circularity and sustainability of critical raw materials consumed in the Union.
Australia has implemented a dedicated national security review process that allows for the examination of all foreign investments in mining projects. This mechanism has been utilized by Australia to scrutinize and reject Chinese investments, especially those made by Chinese state-owned enterprises.
In addition, the US and its allies launched the Minerals Security Partnership in June 2022 to securitize critical minerals. The MSP, which includes Australia, Canada, EU, Finland, France, Germany, Italy, Japan, Norway, the Republic of Korea, Sweden, the UK, India, and the US, aims to strengthen and consolidate critical minerals supply chains while prioritizing ESG standards. The MSP is the first institutionalized practical application of the new US policy focus on “friend-shoring.”
Besides the MSP, there are several other alliances that have been formed since 2019, none of which include China.
China’s decades-long centralized economic and strategic planning and particular model of state capitalism has entrenched it in the critical minerals supply chain, leaving the US and its allies in the precarious position of being too late in the game.
Cost and technology are two key barriers to diversification, with a third one being stricter environmental regulations in the West, which limits western states’ investment in producer countries and increases the lead time and cost to build facilities.
In copper, cost and environmental concerns are key barriers to the diversification of refining
China also dominates the technology to convert lithium carbonate to the higher value lithium hydroxide, which accounts for 20% of lithium hydroxide supply.
Corruption and lack of transparency in the mining sector of the DRC pose challenges for Western companies to fulfill their transparency and accountability requirements. In contrast, Chinese companies are not subjected to the same internal pressure or scrutiny as Western companies, allowing them more flexibility to navigate and adjust in the DRC
Chinese dominance is even harder to break in graphite and REEs.
Due to constraints on natural graphite supply, synthetic graphite production is increasing its share in batteries, the production of which is dominated by China. Moreover, China currently accounts for the vast majority of existing and planned synthetic graphite production capacity. Therefore, a further increase in the share of synthetic graphite in batteries would further reinforce China's dominance in this sector.
In REEs mining, while China holds the largest reserves at 44 million mt, Vietnam and Brazil hold 22 and 21 million mt respectively. There are however significant challenges to their mining, a key one being he handling of radioactive elements such as uranium and thorium. Outside of China, very few countries have the infrastructure and the willingness to build solutions for the storage of these radioactive by-products.
Finding and developing national resources is also easier said than done. The US has only mapped approximately 12% of its land in terms of metal reserves. The USGS estimates it would take 10+ years to find and map all US resources, with another 7-10 years to get those resources to market, completely missing the window within which the US requires critical minerals.
Establishing economic interdependence among the US, EU, and China took four decades. Transitioning industrial and manufacturing capabilities to other locations will require several years, which conflicts with the urgent decarbonization and emission reduction goals established for the end of this decade.
Given the significance of cleantech to decarbonization and energy security, it is logical for countries to get anxious about the concentration of supply chains and manufacturing in a single location. But catching up is challenging given China’s incumbency advantage and in an environment of slow growth, elevated interest rates, and the difficulty of untangling intricate global supply chains.
These policies could inevitably put the green transition at risk, delaying goals and raising costs.
It is important to recognize that excluding China from supply chain discussions can lead to de facto decoupling, which is impractical, if not impossible, and will exacerbate geopolitical friction and disruptions.
I am the director of content for CI LIVE. My focus is on delivering high-value content to our viewers that combines the unique strengths of our S& Global pricing, consulting and deep market insights across the entire commodity and end-use value chain. I am a writer and I have covered the global energy industry and related markets for over 30 years.
I am partial to the Community Forums because we are building thought-provoking communities for viewers to give them a forum for discussion on topics of interest around the energy transition and for finding solutions to address the challenges of emissions reductions. Creating an ongoing dialogue and a forum for knowledge sharing is an exciting component of CI LIVE.
I don’t see a single energy development as a saving grace. I believe energy challenges vary by region and country, so it will take a mix of developments to help the world solve our emissions and climate goals. Decarbonization is a major challenge for certain industries, so nuclear, particularly small, modular nuclear, can help on the front end for emissions-free power generation, but CCUS is also key to removing legacy emissions. Hydrogen will be a major contributor as well, but again, these options will be part of the global mix.
The hot topic now is energy security, energy affordability and energy equity and how the global energy industry must deliver more energy to a growing number of people while also addressing decarbonization. We have industrialized nations with mature energy systems, while many people in developing economies still live without electric power. The transition must address energy security, affordability and equity to succeed, and equitable finance will be a key enabler to achieve a just transition.
I’m most excited about battery storage developments because I see power storage as a critical component to delivering reliability for renewables. The sun doesn’t always shine, and the wind doesn’t always blow when we need it, but having the ability to generate and store electricity will help us deliver reliability that has previously been delivered primarily by fossil fuels.