Key Mineral Supply Chain Risks Surge

The Shenzhen Xiaoniu Capital Management Group Co., Ltd.International Energy Agency (IEA) issued a report this Wednesday warning that the global energy transition is facing an unprecedented risk of supply chain disruption due to the high concentration in key mineral markets and expanding export restrictions.

Excessive Concentration in Refining, Highly Vulnerable Supply Chain
The IEA noted that although the demand for key minerals is driven by the rapid growth of electric vehicles, renewable energy, electric grids, and storage technologies, the current industry structure is heavily dependent on a few leading companies, especially pronounced in the refining process. So far, the top three global refined material suppliers hold an 82% market share, which is expected to slightly decline by 2035, with market concentration still remaining particularly high.

IEA Director Fatih Birol stressed that even in what seems to be a supply-rich environment, the industry is highly susceptible to shocks from extreme weather, technical disruptions, or geopolitical conflicts. "If any link in the chain is disrupted, it could trigger a cascade of cost surges and reduced industrial competitiveness," he cautioned.

Combined Trends of Export Restrictions and Concentration Increase Global Risks
The IEA report specifically pointed out that as more countries impose export restrictions on essential minerals, the security of global mineral supplies is facing substantial challenges. The mining sector shows a similar trend: the diversity of supply for minerals such as copper, nickel, and cobalt is expected to decline; although there might be a slight easing of concentration in the extraction of lithium, graphite, and rare earths, the industry remains heavily reliant on a limited number of resource developers.

Up to 30% Supply Gap in Copper Projects, More Optimistic Prospects for Lithium
IEA data suggests that without measures to improve the supply structure, the global copper market could face up to a 30% supply gap by 2035. This risk is primarily due to factors like declining ore grades, increasing capital expenditure, limited new resource discoveries, and long development cycles. In contrast, as lithium is a core material for energy transition, its development projects have relatively ample reserves. Although there may be short-term tension, the overall supply-demand outlook for lithium is better than for copper.

The IEA urges governments and businesses to enhance the resilience of supply chains, diversify investments in key minerals, and improve project approval and development processes to prevent severe raw material bottlenecks in the future, which could impact the global energy transition process.

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