The incident has also made others in the United States and Europe aware of the risks of over-reliance on China for supplies of strategic minerals. In 2010, China produced about 97% of the world’s supply. Today, that percentage is less than 70 percent, and is declining rapidly as production increases in North America, Europe and Australia.
However, the prospect of a ban, whether materialized or not, points to a broader problem. The transition to net zero emissions will involve a substantial increase in a range of strategic metals and minerals.
Copper has been the most widely discussed topic, with various reports saying that meeting the net-zero emissions target by 2050 would require the best part of the 10 million tonnes of supply not yet in the pipeline within a decade at a cost of close to $350 billion new investment. Increased demand could force copper prices nearly 50% higher than they are currently.
Rare earth elements are vital to the production of electric motors and cars, smartphones, wind turbines and airplanes, and also have many military uses.Credit: Bloomberg
Global rare earth production was about 300,000 tonnes last year. An estimated 200,000 tonnes will need to be added over the next ten years if projected demand for EVs alone is to be met.
It’s not just copper and rare earths, important though they are. Achieving climate goals through greener technologies will also require substantial increases in production of common metals such as iron ore, nickel and aluminium, as well as materials such as lithium, graphite, magnesium and cobalt.
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In a report earlier this month focusing on export restrictions on raw materials for green technologies, the OECD estimated that demand for raw materials needed for the green transition would increase four to six times.
It found that the value of key raw materials has been growing faster than trade, but that global production of these materials has become more concentrated among producing countries, often more than their global imports and exports.
In addition, export restrictions and export taxes have increased five-fold in the decade to 2020 and many more since – more than 13,000 restrictions. The restrictions mean that one-tenth of the global value of key raw materials faces at least one curb, which the OECD said could play a “significant” role in key raw materials markets, affecting availability and prices.
In just over a decade (as of 2020), China has increased its restrictions ninefold on the amount of raw materials needed for electric vehicles and renewable energy technologies, it said.
While China topped the list of the most restrictive countries, India, Vietnam, Russia, Argentina and Kazakhstan were the other countries that imposed the most restrictions between 2009 and 2020. They all have the largest reserves of key raw materials, accounting for a significant portion of their global production.
Some restrictions are well-intentioned, whether in the hope of generating more revenue from natural resources (the OECD says export taxes are the biggest factor in increasing restrictions) or by limiting the volume of exports to support downstream industries.
The scale of increased demand for strategic raw materials is daunting enough if global decarbonization targets are to be met by mid-century, without existing supply chains being disrupted or distorted by economic nationalism or geopolitics.
Post-pandemic push “Return to shore” and “Friendship to shore” strategic activities This has been enshrined in the US Biden administration’s Lower Inflation Act and the EU’s Critical Raw Materials Act, both of which aim to encourage domestic and/or alliance producers and processors to increase supply and processing to reduce the risk of Dependence on friendly producers. (Australia’s Lynas is building a rare earths refinery in Texas with US government funding).
Such diversification and decentralization will reduce the vulnerability of advanced economies to various threats, such as China’s decision to ban the export of high-tech magnets.
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However, it could also increase the prices of these strategic raw materials even more than they would otherwise be by locating mines and processing (very toxic for rare earths) in higher-cost jurisdictions with stricter environmental standards.
The scale of increased demand for strategic raw materials is daunting enough if global decarbonization targets are to be met by mid-century, without existing supply chains being disrupted or distorted by economic nationalism or geopolitics.
Unfortunately, however, these hurdles appear to be hurdles that must be considered in the advanced economies’ scramble, especially to realize their green ambitions.
