In a few years, the history books will speak of the beginning of the 21st century as the moment from which the economic development model went from depending on the availability of fossil fuels (and the whims of the OPEC cartel) to another even more unpredictable risk: being at the mercy of the unknown supply of mining operations.
Because the energy transition, which aims to reduce emissions, will have to be done with minerals. No other category of goods in the world has grown so much in the last decade, in terms of the value of its exports. But these critical elements (more than thirty chemical substances) are concentrated in areas of the planet located in highly unstable political areas.
The recent coup in Niger, a country that provides almost 10% of the uranium used by French nuclear power plants, reminds us that green industries and the digital revolution will have to pay an added toll for their businesses: geopolitical uncertainty.
Australia dominates in lithium, Chile in copper, China in graphite and rare earths, the Democratic Republic of Congo in cobalt, Indonesia in nickel, South Africa in platinum or iridium. But countries such as Mozambique, Gabon, Peru, Zambia or the Philippines also appear on the list, each with its difficulties in economic, political and social development.
A recent study by IRENA (International Renewable Energy Agency) entitled Geopolitics of the energy transition lists the possible risks that these countries with abundant strategic resources may suffer: natural disasters as they are geologically sensitive areas (earthquakes, mine accidents); legal uncertainty (expropriations, taxes); corporate cartels (excessive price fixing or market manipulation); outbreaks of violence, corruption or strikes and limitations on exports (since 2021 three of the five countries in the Sahel region have experienced coups of greater or lesser intensity are now governed by a military junta). Likewise, more than half (54%) of the essential minerals for the energy transition are located on lands close to indigenous populations, which aggravates the possibility of generating social conflicts.
“Supply disruptions can impact multiple industries and spread throughout the economy. These risks can rise in the short and long term, as demand increases and mining processes remain concentrated,” the IRENA report states. “For years this was not a problem, but this uncertainty that we have today could last up to fifteen more years,” acknowledges Elizabeth Press, IRENA’s director of planning and programming.
The market for energy transition minerals has doubled in the last five years, reaching a value of 320,000 million dollars, according to the calculations of the International Energy Agency (IEA) in its latest Critical Minerals Market Review. 2023, especially after the boom in demand for copper, lithium, nickel. cobalt and graphite. These estimates support that the consumption of minerals will multiply by four by 2050. An electric car requires six times more minerals compared to an internal combustion one. An offshore wind platform needs thirteen times more critical metals than a conventional gas plant.
As a consequence, the prices of these minerals are already above their historical averages, with which the weight of these elements in the final cost of sustainable energy technologies also increases: in a battery, they have gone from 5% to 20%, estimates the IEA.
The problem itself is not the scarcity of these natural resources. But the exploitation capacity. In this sense, we must distinguish reserves from production: Bolivia has 21 million tons of lithium in its territory but only contributes to 1% of world supply. Therefore, investments are required. They do not stop increasing: only in 2022 they grew by 30%, according to the IEA. But it takes a lot more to satisfy a growing appetite.
For example, starting a copper mine can take five years and the sector in these emerging countries has suffered years of lack of financing and bad governance. Even in the absence of revolutions or military coups, the business of critical minerals suffers from structural weakness.
Its market presents oligopolistic features, where a few companies take the cake and dominate the market (five companies produce 61% of lithium and 56% of cobalt); it is based on an opaque trading system, often locked into opaque bilateral agreements between states and with the possibility of restrictions on trade in these strategic materials at any time.
In fact, China. The world’s leading supplier of gallium and germanium, minor metals used to make semiconductors, recently announced restrictions on exports, citing national security reasons. Indonesia has also banned nickel sales and is considering doing the same for bauxite. Peru wants to raise the royalties it will charge for copper mining and Congo wants to renegotiate foreign companies’ access to cobalt resources. Mexico just nationalized lithium.
It is the latest trend: to use minerals as a political weapon. And economic: according to the US Geological Survey, a 30% cut in the supply of gallium to US firms could cost two percentage points in GDP growth. An OECD study, Raw materials critical for green transition, estimates that restrictions on trade in critical minerals have multiplied by five since 2009. The report estimates that 10% of the global value of exports of critical materials It has suffered in recent years some restrictive measure for its commercialization (tariffs, quotas, etc.). China, India, Argentina, Russia, Vietnam and Kazakhstan are the countries that have placed the most obstacles in this regard.
But all is not lost, far from it. According to IRENA’s Elizabeth Press, there are a few factors that could counter this pessimistic picture. First, innovations are constant. Fewer and fewer minerals are needed as efficiency improves or they can be substituted with less problematic ones. Recycling and the circular economy are spreading, which decreases the imperative requirement to have immediate availability of these elements by taking advantage of those already used.
Finally, the large Western economies also have an interest in promoting supportive policies and foreign investment to stabilize these countries rich in natural resources. In addition, it must be taken into account that if there may be supply and price problems, if compared, for example, with what is paid for oil, the bill is lower and both the EU and the US have launched directives and standards to diversify materials and countries (and if necessary, lithium can even be removed from Extremadura, as is planned to be done in Spain). This would be the coup (effective, not military) of Western industries to promote the energy transition.
