By Monia Snoussi-Mimouni, Sandra Avérous

Critical minerals, such as cobalt, copper, lithium, nickel and rare earths, play a crucial role in the production of clean energy technologies, from wind turbines to electric cars. Over the past 20 years, annual trade in energy-related critical minerals has increased from US$ 53 billion to US$ 378 billion. However, the high demand for clean technology goods is putting pressure on the supply chains for these minerals.

Critical minerals are particularly in demand for the production of batteries for electric cars, with each battery requiring as much as 200kg of critical minerals. The battery sector is responsible for 70 per cent of the global demand for cobalt. It also requires aluminium, copper, lithium, nickel and rare earths. Electrolysers — crucial for green hydrogen production — rely on a variety of critical minerals, including platinum and iridium, two of the world’s rarest and most expensive metals. Rare earth elements are needed in particular for magnets, a vital component in many electrical machines, especially the most energy-efficient ones.

For the transition to a low-carbon economy, energy-related critical minerals are considered by many economies to be an essential component (see Table 1). This blog post focuses on the upstream part of their supply chain, where they are unprocessed minerals. Processed minerals, manufactured components and articles made with these minerals are not included in the analysis.

Imports

Trade in critical minerals has grown over the past two decades, with an average annual growth rate of 10 per cent. In 2021, growth surged to 37 per cent as trade bounced back following the slump induced by COVID-19. The value of imports has almost doubled during the last five years, rising from US$ 212 billion in 2017 to US$ 378 billion in 2022, with a significant increase in trade in platinum group metals (PGM), such as rhodium, iridium, ruthenium and osmium.  These metals have recorded annual growth rates of up to 72 per cent since 2017 (see Table 2). Helium and lithium have also recorded impressive annual growth rates of up to 53 per cent since 2017.

Over the past five years, trade in PGM, rare earths and other minerals has almost doubled, reaching a total value of US$ 219 billion in 2022.

Imports of copper have seen an average annual increase of 15 per cent since 2002, with a 12 per cent increase in the last five years (see Figure 1). This growth is largely due to an increase in commodity prices and increased imports of two major importers, China and Japan. China's imports have grown by 24 per cent since 2002, while Japan's imports have seen an average annual increase of 10 per cent (see Figure 2). Together, these two economies constitute about 72 per cent of world copper imports, with China alone representing nearly 60 per cent. However, in 2022, this upward trend was not maintained, with a slight decrease in growth for major importers of copper.

Imports of “earths, stone and ores” minerals have continued an upward trajectory, increasing by 24 per cent in 2021 and 18 per cent in 2022. The average growth rate over the last five years has been 9 per cent, more than doubling in value since 2016.

In 2022, China stood as the largest importer of critical minerals, accounting for 33 per cent of the global total, followed by the European Union at 16 per cent, and Japan and the United States both at 11 per cent.

China's leading position is particularly noteworthy for copper imports, in which it far exceeds the imports of other economies. China is also the leading importer for 13 out of 17 “earths, stone and ores minerals”, while the European Union is the world’s largest importer of PGM, rare earths and other minerals, followed by the United States, China and Japan (see Figure 3).

The most traded mineral is copper, representing 26 per cent of the total mineral imports followed by unwrought aluminium at 20 per cent. Those two metals have long been used in traditional industry. Excluding these two metals, rhodium and palladium emerge as the most traded minerals in 2021 and 2022, accounting for 30 per cent of the world total in 2021 and 22 per cent in 2022. The value of rhodium imports increased sixfold between 2019 and 2021. Similarly, imports of helium and lithium recorded a sixfold rise in value in 2022 compared to 2019.

 

Exports

Chile is the world's leading exporter of critical minerals, accounting for 11 per cent of global exports in 2022 (see Figure 5), followed by South Africa (10 per cent), Australia, Peru, and the Russian Federation (all at 6 per cent).

South Africa is the main exporter of PGM, rare earths and other minerals, with a global share of 13 per cent in 2022 (see Figure 6). Indeed, PGM are mined mainly in South Africa, the Russian Federation, and the United States of America, while rare earths are mostly found in China and the United States. The European Union is a major global producer of magnesite and barytes.

For earths, stone and ores, South Africa is the leading exporter (with a 14.3 per cent global share), just ahead of Australia by 1.25 percentage points, followed by Guinea, which holds a 9 per cent share of exports, mainly due to aluminium. Peru is the fourth-largest exporter, mostly extracting zinc, tin and molybdenum.

Finally, Chile is the leading exporter of copper, accounting for more than one-quarter of global exports, followed by Peru at 19 per cent and Indonesia at 9 per cent.

Data on unprocessed minerals need to be considered in conjunction with information on extraction and processing. For example, according to the International Energy Agency (IEA), approximately 70 per cent of worldwide graphite extraction and close to 100 per cent of processed graphite production take place in China. Consequently, only the remaining 30 per cent of worldwide graphite is internationally traded, and graphite import and export data cover only 30 per cent of the world's unprocessed graphite.

Import tariffs

The most-favoured-nation (MFN) tariff applied to imports of critical minerals was approximately 4 per cent in 2022. This is almost 2 percentage points lower than the tariff applied in 2002. The applied tariff for PGM, rare earths and other products was 4 per cent, while for earths, stones and ores products it was 3 per cent (see Figure 7).

On the other hand, bound — or maximum — tariffs are on average reaching about 26 per cent, indicating significant room for manoeuvre for WTO members to increase their applied tariffs should they need to do so. Some major importers, such as Brazil, India and Thailand, have a margin of more than 20 per cent between bound and applied rates. Bound tariff rates for PGM, rare earths and other minerals and for earths, stone and ores are closely aligned.

 

Export restrictions and export tariffs

Apart from import tariffs, critical minerals can also be subject to export restrictions or export tariffs. These measures could potentially impact the global supply of critical minerals, resulting in upward pressures on world prices and concerns about how secure the supply of raw materials to manufacturers is, as indicated in the Organisation for Economic Co-operation and Development (OECD) Methodological note to the Inventory of Export Restrictions on Industrial Raw Materials. Already, the OECD database has revealed an upward trend of export restrictions on energy-related raw minerals, with the number of export restrictions, including export tariffs, increasing from 396 measures in 2009, to 472 measures in 2012, to 489 measures in 2017, to 502 in 2021 (see Figure 8).

 

Conclusion

The last five years have seen an acceleration in the value of trade in unprocessed critical minerals. The recent commitments at the 2023 COP28 Climate Change Conference in Dubai to triple renewable energy production and the trend towards electric vehicles, which will play a role in helping to reduce greenhouse gas emissions and maintaining the objective of the Paris Agreement to remain within a global temperature rise limit of 1.5 degrees Celsius, are leading to an increased demand for energy-related critical minerals. Special efforts will be needed to diversify the availability of critical minerals in the future to respond to this growing demand. Open trade can be an important element in the collective effort to support a sustainable transition to a low-carbon economy.

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