Growing geopolitical tensions underscore the need for stronger action on critical minerals security

Critical minerals markets have been through a tumultuous few years, with a relentless surge in prices during 2021-2022 followed by major price declines. Lithium prices have fallen by over 80% since 2023 after increasing eightfold in the previous two years, while nickel, cobalt and graphite prices have halved over the same period.

Demand growth has remained fairly constant over this period. Lithium demand has risen by 25% per year since 2021, while demand for nickel, cobalt and graphite has also increased by 7-10% per year over the same period. However, a combination of even stronger supply growth - particularly from Africa, Indonesia and China - and an overhang of downstream technology inventory, such as battery cells and cathodes, has produced considerable downward pressure on prices.

Today's markets may be relatively well supplied, but security of supply is far from guaranteed. Trade restrictions affecting critical minerals have proliferated, notably in the form of export controls applied by China. Moreover, our detailed analysis of future supply-demand balances suggests that markets for some key minerals, particularly copper and lithium, could tighten considerably in the coming years. For example, projected lithium demand in 2035 is 50% higher than our baseline expectations for supply from existing and announced projects.

Nickel, cobalt and graphite, may not face the same volume supply risks under today's policy settings, given a larger number of announced projects in the pipeline, but they exhibit much higher market concentration with heavy reliance on a small number of producers.