In recent years, the escalating demand for critical minerals like cobalt, copper, lithium, nickel, and rare earths, essential for clean energy technologies, has given rise to significant challenges in global supply chains. These minerals play a pivotal role in producing clean energy goods, from electric cars to wind turbines. The annual trade in energy-related critical minerals has surged from $53 billion to $378 billion over the past two decades, reflecting the soaring demand for clean technology.
The surge in demand is particularly pronounced in the production of electric vehicle batteries, where each battery requires up to 200kg of critical minerals. The battery sector alone accounts for 70% of the global demand for cobalt, along with the need for aluminum, copper, lithium, nickel, and rare earths. Additionally, critical minerals like platinum and iridium are essential for electrolysers crucial in green hydrogen production.
To meet the transition goals toward a low-carbon economy, these energy-related critical minerals are deemed essential. The focus of this analysis centers on the upstream part of their supply chain, where they exist as unprocessed minerals, excluding processed minerals, manufactured components, and articles made with these minerals.
Imports of critical minerals have witnessed remarkable growth, with an average annual growth rate of 10% over the past two decades. In 2021, trade in these minerals surged by 37%, rebounding from the impact of the COVID-19 pandemic. The value of imports nearly doubled in the last five years, reaching $378 billion in 2022, with a significant upswing in trade of platinum group metals (PGM) and other key minerals.
China emerged as the largest importer of critical minerals in 2022, constituting 33% of the global total, followed by the European Union, Japan, and the United States. The most traded mineral is copper, representing 26% of total mineral imports, followed by unwrought aluminum at 20%.
On the export front, Chile stands out as the leading exporter of critical minerals globally, accounting for 11% of global exports in 2022. South Africa, Australia, Peru, and the Russian Federation also play significant roles in exporting critical minerals.
Despite the impressive growth in trade, challenges loom, including potential supply chain disruptions due to heightened demand. The most-favored-nation (MFN) tariff applied to imports of critical minerals was approximately 4% in 2022, indicating a slight decrease from 2002. However, bound tariffs, the maximum rates, suggest room for adjustments, with an average reaching about 26%.
Export restrictions and tariffs pose additional concerns, as demonstrated by an upward trend in the number of export restrictions on energy-related raw minerals. The number increased from 396 measures in 2009 to 502 in 2021.
In conclusion, the surge in trade of energy-related critical minerals signals a pivotal juncture in meeting the demands of a sustainable and low-carbon global economy. Efforts to diversify the availability of critical minerals become imperative to address the escalating demand, and open trade remains a crucial element in supporting a sustainable transition.