🌱 What creates vulnerabilities in mineral supply chains?
Mineral resources are a key source of income for some countries. Yet, “resource abundance does not always bring sustained economic growth and development”. The mining industry often only creates limited direct employment in the regions where the extraction occurs. Moreover, the abundance of resources can even have the opposite of the desired effect, which is commonly referred to as the “resource curse”. In line with this, according to the OECD, many countries that rely heavily on minerals for their wealth “have weaker institutions, spend less on education and are more corrupt”. To counter some of these adverse effects or for geopolitical reasons, countries may enact export restrictions. All these factors can create uncertainty and shortages in the supply chains of minerals.
🌱 How is the supply of minerals impacting the energy transition?
The OECD has said that “[a] significant scaling up of both production and international trade of critical raw materials is needed to meet projected demand for the green transition and achieve global net zero CO2 emissions targets”. According to a recent report from the OECD, the “[s]upply of critical raw materials risks jeopardising the green transition”. The upstream supply chains segments for borates, cobalt, colloidal precious metals, lithium, magnesium, and manganese have “significant concentrations of exports and imports”, and they are therefore currently particularly vulnerable.
🌱 Is the global mineral production meeting the needs for the transition?
In its report, the OECD highlighted that “the production and trade of most critical raw materials has expanded rapidly” over the past decade. For arsenic, chromium, cobalt, lithium, magnesium, rare earth elements, selenium, and titanium, significant increases (between 33% and 208%) in production volumes were recorded over the past decade. Yet notably, the "growth is not keeping pace with projected demand for the metals and minerals needed to transform the global economy from one dominated by fossil fuels to one led by renewable energy technologies”. The demand for the green transition is expected to require a four- to six-fold increase in mineral production. Problematically, for several critical raw materials (incl. lead, natural graphite, precious metal ores and concentrates, tin, and zinc) the global production has decreased in the past decade.
🌱 How dependent is the EU?
According to the German Institute for Economic Research, “[t]he EU is currently 100% dependent on foreign suppliers in 14 out of 27 critical raw materials and is 95% dependent on an additional three critical raw materials”.
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