IEA Report Warns: Critical Minerals Production is Becoming Concentrated, and Supply Chain Diversification Urgently Needs Improvement

On Wednesday (May 21) local time, the International Energy Agency (IEA) stated that the risk of significant supply disruptions in the future is intensifying due to the increasing concentration of critical mineral supplies in a handful of countries, coupled with the proliferation of export restrictions.

The IEA noted that while the critical minerals market currently appears to have sufficient supply and prices are well below their peaks in 2021 and 2022, market concentration in critical minerals is rising rather than falling, particularly in the refining and processing stages.

According to the IEA's annual Critical Minerals Market Review, among copper, lithium, nickel, cobalt, graphite, and rare earth element ores, the average market share of the top three producing countries for each mineral increased from approximately 82% in 2020 to 86% in 2024.

IEA Executive Director Fatih Birol wrote, "In today's world of heightened geopolitical tensions, critical minerals have become a frontline issue for safeguarding global energy and economic security."

"The new report assesses the severity of the critical issues and proposes measures to enhance the resilience and diversity of critical mineral supply chains—a core issue for ensuring the reliability, affordability, and sustainability of energy in the 21st century."

The IEA believes that while policymakers have begun to address the related challenges, detailed analysis of various proposed projects indicates that the diversification of critical mineral supply chains will remain slow. Based on current policy environments and investment trends, the market share of the top three supplying countries is only expected to decline slightly over the next decade.

Birol warned, "Even if the market appears to have sufficient supply, critical mineral supply chains remain highly vulnerable to extreme weather events, technological failures, or trade disruptions. Any supply shock could have far-reaching consequences, driving up consumer prices and eroding industrial competitiveness."

Last week, Guinea, the world's second-largest bauxite producer, announced the revocation of 51 mining operation licenses, including those for bauxite, gold, diamonds, graphite, and iron ore. In response to this news, the most-traded alumina futures contract on the Shanghai Futures Exchange hit its daily price limit on Friday.

The IEA report also pointed out that the supply-demand balance is at risk over the next decade as the momentum for mineral investment is weakening: related expenditures only increased by 5% in 2024, down from 14% in 2023. Exploration activities stalled in 2024, interrupting the upward trend since 2020.

The report particularly highlighted the significant risks facing the copper market. As countries expand their power grid construction, copper demand is set to rise sharply, but the current scale of copper mine project reserves suggests a potential 30% supply gap by 2035.

Growing export restrictions may also affect supply security. Among the energy-related strategic minerals covered in the report, 55% are already subject to some form of export control. Furthermore, the scope of restrictions is expanding, encompassing not only raw materials and refined products but also processing technologies.