Limited Progress in Critical Mineral Supply Diversification: IEA

A new report from the International Energy Agency (IEA) warns that despite growing political momentum and rising demand from clean energy technologies, global supply chain diversification has made minimal headway.

Between 2020 and 2024, the concentration of global refining capacity for critical minerals increased. China and Indonesia drove most of the growth in battery metal refining, especially for cobalt, graphite, and nickel. The top three suppliers of refined materials now control 86% of the market, up from 82% in 2020. China alone dominates supply growth for cobalt, graphite, and rare earths, while Indonesia leads in nickel.

China’s influence goes beyond refining. The IEA estimates that two-thirds of the growth in global battery recycling capacity since 2020 occurred in China. Looking ahead to 2035, the agency expects only a slight decline in refining concentration, back to 2020 levels.

The mining of critical minerals is also seeing limited diversification. While new lithium projects in Argentina and Zimbabwe are promising, supply remains heavily concentrated. The IEA expects copper, nickel, and cobalt mining to become even more geographically restricted.

The agency also raises concerns about supply shortages. Despite a rising number of mining projects, some minerals, especially copper, face significant deficits. By 2035, copper supply could fall short by 30%, driven by rising demand for electrification. Lithium may face a market deficit as early as 2030.

China’s Dominance 

The report underscores China’s central role, noting it refines 19 of the 20 energy-critical minerals, with an average 70% market share. Many of these minerals are also more volatile in price than oil.

Recent export restrictions imposed by China, targeting gallium, germanium, and other key materials, highlight the risk of supply shocks. The Democratic Republic of the Congo’s temporary suspension of cobalt exports adds to these concerns. In total, 11 critical minerals are currently subject to export controls.

“Even well-supplied markets can be vulnerable to disruptions,” said IEA Executive Director Fatih Birol. “Such shocks can drive up costs and undermine industrial competitiveness.”

IEA argues that market dynamics alone will not be enough to drive diversification. High capital costs and low critical mineral prices, such as the more than 80% drop in lithium prices since 2022, are stifling new investment.

To encourage development, the report recommends government interventions like contracts-for-difference, price stabilization mechanisms, and guaranteed purchase volumes. It also backs standards-based policies to support sustainable and diverse supply sources. 

Some countries are already acting. The United States has implemented executive orders to speed up permitting and boost domestic production. The EU has prioritized 47 projects under its Critical Raw Materials Act. Meanwhile, nations like Indonesia and the DRC are seeking to capture more value locally through export controls and domestic content rules.

Targeted incentives for cleaner nickel production could reduce market concentration by up to 7% by 2035, the IEA notes. “This report outlines the risks and steps needed to strengthen the resilience and diversity of critical mineral supply chains,” said Birol. “This is essential for ensuring affordable, secure, and sustainable energy in the decades ahead.”