Demand for key energy minerals is set to grow rapidly across all scenarios, with the largest source of growth coming from the energy sector. In the Stated Policies Scenario (STEPS), lithium grows fivefold from today to 2040, while graphite and nickel demand double. Demand for cobalt and rare earth elements also grows strongly, increasing 50-60% by 2040. Copper is the material with the largest established market, and its demand is projected to grow by 30% over the same period. Battery deployment in electric vehicles (EVs) and storage applications drives strong demand growth for these minerals. Meanwhile, expanding construction and the electrification of grids and industrial equipment are fuelling increased demand for copper. Growing demand for permanent magnets, particularly from EVs and wind power, boosts the need for magnet rare earths.

Meeting the rising demand for critical minerals under both the STEPS and APS would require substantial investment for new mines and refineries. In the STEPS, around USD 500 billion in new capital investment is required for mining between now and 2040. In the APS, as mineral demand rises more rapidly, capital requirements are about 15% higher at USD 600 billion over the same period (excluding sustained capital expenditure). These amounts reflect not only the scale of demand growth, but also the increasing capital intensity for new projects, driven by declining ore quality, particularly in more mature markets such as copper. 

Based on the project pipeline in the base case, overall supplies of some key energy minerals are on track to meet projected demand under today’s policy settings in the STEPS. Copper and lithium are major exceptions where expected mined supply from announced projects falls short of projected demand in 2035, with implied deficits of 30% for copper and 40% for lithium in the STEPS. The supply gap for copper is particularly concerning due to declining ore grades, rising project costs and a sharp slowdown in new resource discoveries, all of which make bringing new supply online highly challenging. For lithium, while the market is poised to be well-supplied in the near term, rapidly growing demand is projected to turn market balances into deficits by the 2030s although the prospects for developing new lithium projects are stronger than for copper.

Long-term supply gaps for nickel and cobalt are narrowing, especially as there is a host of projects being planned at a relatively early stage. If these projects come online as scheduled, as in the high production case, expected nickel and cobalt supply could cover demand in the STEPS in 2035. Rare earth elements appear to be sufficiently supplied in 2035 based on the project pipeline. However, supply concentration for rare earths and graphite remains a key vulnerability.

Based on the project pipeline, the geographical concentration of mining operations is set to remain high for most minerals. Mined supply is set to increase in concentration in the top three countries for copper, nickel and cobalt by 2035. In 2035, the top three producing countries for nickel supply 85% of the market, up from 75% in 2024. Indonesia is set to see significant supply growth in both nickel and cobalt markets over the next decade. There is some diversification emerging in the mining of lithium, graphite and rare earth elements. The share of mined lithium supply from the top three producers is set to fall below 70% by 2035, down from over 75% in 2024. Graphite and rare earth elements also see some improvement as new mining suppliers emerge over the next decade – Madagascar and Mozambique for graphite and Australia for rare earths.

However, refining operations for most minerals are set to remain highly concentrated over the next decade. Refining concentration increases significantly for nickel due to major growth in supply in Indonesia. Despite some diversification occurring for lithium and others, China remains the dominant refined supplier for almost all minerals. In 2035, China is set to supply over 60% of refined lithium and cobalt, and around 80% of battery-grade graphite and rare earth elements.

This high market concentration means there is a risk of significant shortfalls in supply if, for any reason, supply from the largest producing country is disrupted. In natural gas markets and whole energy systems, resilience analysis, often called “N‑1” assessment, is used as a tool to understand potential vulnerabilities in the system. Conducting this N‑1 assessment in the critical mineral context can provide useful insights into how the system may look when the largest supplier is excluded from global supply and demand balances. The supply remaining after excluding the largest supplier is known as the N‑1 supply. We compared this with N‑1 demand, which excludes the consumption of the largest supplier.

Nickel, cobalt, graphite and rare earth elements appear relatively well supplied on a global basis in 2035 in the STEPS. However, if the largest supplier and its demand is excluded (China for lithium, cobalt, graphite and rare earths, and Indonesia for nickel), the picture becomes starkly different. The remaining N‑1 supplies would fall significantly below N‑1 demand. For graphite and rare earth elements, the remaining supplies would cover only 35-40% of N‑1 demand in 2035, entirely insufficient to meet the mineral needs. The N‑1 supply covers less than 55% of N‑1 demand for nickel, but the ratio would be much lower if battery-grade nickel sulphate supplies (mostly from China) were also disrupted. For lithium and cobalt, the gap is less stark, but the remaining N‑1 supply still covers only 65% of N‑1 demand for both. This emphasises that even where the overall global balance is reasonably well supplied, critical mineral supply chains can be highly vulnerable to supply shocks, whether from extreme weather, trade disruptions or geopolitics. Copper is the only critical mineral where the N‑1 supply almost covers N‑1 demand, as China is the largest consumer of refined copper as well as its leading supplier.

Disruptions in mineral supplies can have major impacts on technology prices, manufacturing competitiveness, inflation and the wider economy. Spikes in battery metal prices caused by disruptions can drive up the cost of both batteries and EVs, potentially hindering the pace of electrification and causing significant economic consequences. In 2010, the price of rare earth elements spiked by as much as ten times when China held back exports. If a lithium, nickel or graphite supply disruption were to occur, causing a fivefold price surge, average battery pack prices globally would increase by 20%. In the case of tenfold price increases, battery prices would go up by 40-50%, substantially reducing their competitiveness. This could result in more expensive EVs, reducing affordability for consumers and slowing adoption.

Mineral supply shocks and disruptions can also strongly hinder plans to develop diversified energy technology manufacturing supply chains. Today, the battery manufacturing cost-competitiveness gap among economies is already stark with the levelised cost of production of battery cells 40-50% higher in Europe and the United States than in China. Higher mineral prices, resulting from supply disruptions, could widen this manufacturing cost gap further. A supply shock resulting in graphite prices increasing fivefold would further widen this cost gap to 70% for both economies, making their manufacturing significantly less competitive, with strong potential implications for industrial developments and jobs. Prolonged disruptions could also lead to major revenue and job losses for manufacturers, with significant economic consequences for economies with growing battery manufacturing bases, such as Europe, Japan, Korea and the United States.

A successful scale-up of recycling can lower the need for new mining activity by 5-30% by 2040 in the STEPS. With increasing feedstock availability thereafter, recycling reduces the need for new mine development by 35% for copper and cobalt over 20% for lithium and 15% for nickel by 2050. In a scenario which meets climate pledges, this increases to 25-40%. Enhancing critical minerals recycling offers substantial financial and sustainability benefits, reducing mining investment needs by around 30% through 2040. Recycling can also mitigate the environmental and social impacts associated with mineral production. On average, recycled energy transition minerals such as nickel, cobalt and lithium incur 80% less greenhouse gas emissions than primary materials produced from mining.

In order to ensure secure and sustainable mineral supply chains, a redoubling of efforts to scale up all forms of recycling, urban mining and mine waste treatment is needed. Long-term policy visibility is central to providing the confidence investors and recyclers need to commit to new projects. Clear targets and intermediate milestones need to be set to provide investors with clarity on policy direction.