VINACHEM

Delays in critical raw material mining projects and inadequate refining capacity threaten to undermine the EU's aim to lead in the clean energy sector and its broader strategic autonomy, according to a new report by Systemiq, supported by Breakthrough Energy and analyzed by The Energy Transitions Commission.

In the report titled "Critical Raw Material Supply-side Innovation Roadmap for the EU Energy Transition," released Dec. 10, Systemiq noted that a key global challenge was the major supply shortfall for most critical raw materials expected by 2035, as clean technology deployment accelerated over the next 10 to 15 years.

Despite evolving battery chemistries, material innovation, and improved recycling rates potentially reducing primary supply requirements, the report projected a significant supply gap for most critical raw materials (CRMs) in a net-zero scenario by 2035.

This was particularly true for copper, lithium and graphite, with demand forecast to exceed supply from existing and newly announced mines by 40%, 110%, and 80%, respectively, according to the report.

Platts, part of S&P Global Commodity Insights, assessed both battery grade lithium carbonate at $10,750/mt and hydroxide at $9,700/mt CIF Europe on Dec. 9, down 32% and 39%, respectively, since the start of 2024.

Another key global challenge was the heavily concentrated global CRM supply chains, with around 40% of global nickel mining in Indonesia, around 70% of cobalt mining in the Democratic Republic of Congo, and China dominating the global production of all CRMs.

EU mining, refining output down

Focusing on the EU, the report identified key challenges, including a decline in the region's mining and refining output from 25% to under 7% over the past 40 years, leading to increased reliance on imports.

"While there is an established industry for copper, nickel and cobalt mining and refining, the EU has virtually no existing domestic capacity for lithium, graphite and REEs production at scale. The EU is therefore virtually entirely import-dependent for these CRMs," it said.

The report also said that the EU was off track to meet its Critical Raw Materials Act (CRMA) mining and refining targets for several key materials.

The CRMA entered into force earlier in 2024 and set targets for the EU's domestic share of CRM mining (10% of annual consumption), processing (40%) and recycling (25%) by 2030. It also imposed a limit on the total annual consumption of any strategic raw materials sourced from a single external country to 65%.

The report noted that most EU CRM projects announced in recent years were still in the early development stage, struggling with local opposition and permitting challenges.

"Copper is the only CRM for which the EU appears on track to meet its targets based on existing output and announced new projects," it said, adding that there was a large pipeline of prospective lithium mining and refining projects, but these faced significant uncertainty.

It noted that the current average timeline for new mines and refineries to come online after feasibility studies was around five years, meaning new projects would need to be expedited to be ready by 2030.

New technologies

To address these global and EU challenges, the report suggested that new technologies, such as scaling primary sulfide leaching, geothermal direct lithium extraction and novel synthetic graphite production, could significantly boost supply by 2035 from planned and new projects.

It also identified several tools to stimulate supply-side innovation in the EU, including innovation support programs like Horizon Europe, the ERA-MIN network, the European Technology Platform on Sustainable Mineral Resources (ETP SMR), and EIT Raw Materials.

Project financing was another tool, it said, such as directing greater investment for commercial deployment of new technologies, enhancing production-based support like tax credits and expanding loan guarantees through the InvestEU program and including mining/refining CRMs within target investment areas of the STEP initiative and a new European sovereignty fund.

Additionally, the report addressed offtake and price volatility, suggesting support for innovators in securing offtake agreements that offer price stability for domestically produced materials, as well as providing loans to downstream sectors, introducing incentives for domestically produced CRMs and establishing mandates for these materials at the downstream sector or country level.

It noted that CRMs were subject to highly volatile prices and increasing trade restrictions as resistance to free trade and geopolitical concerns had grown.

Enabling environment

The report called for an enabling environment, saying the administrative process and facilitate coordination should be streamlined to fast-track high-impact projects.

It also emphasized the need to enforce CRMA provisions to limit permitting timelines for projects deploying innovative technologies, implement coordinated action to build integrated downstream value chains and include responsible mining/refining of CRMs within the EU taxonomy for sustainable activities.

Furthermore, it called for international competitiveness, advocating that EU production should be promoted through targeted trade measures where necessary, while fostering innovative technologies in partner countries.

The report said technology and skills transfer from foreign investors were required to EU partners when investing in CRMs or downstream value chains and the EU should also promote piloting and scaling innovations that reduce environmental footprint in partner countries through Strategic Partnerships and the Minerals Security Partnership.

– Source: Platts