Secure and sustainable supply of critical minerals

As a result, secondary recovery of materials has also been increasingly in demand. Battery recycling has witnessed a substantial investment boost of over 35%, reflecting the growing importance of recycling in the sustainable management of critical metals.

In fact, the necessity for secure access to critical raw materials is underscored by the fact that these materials serve as the building blocks for advanced technologies powering the green and digital transitions.

Rare earth elements are essential components of renewable energy systems, electric vehicles, and high-tech electronics, demonstrating their pivotal role in our sustainable future. In fact, record deployment of clean energy technologies such as solar PV and batteries is propelling unprecedented growth in critical minerals markets.

Yet, adequate and sustainable mineral supply is a growing concern. Countries are seeking to diversify mineral supplies with a wave of new policies. The proliferation of such initiatives includes the US’s Inflation Reduction Act, Australia’s Critical Minerals Strategy and Canada’s Critical Minerals Strategy, among others, and last but not least the European Union’s Critical Raw Materials (CRM) Act. With the adoption of regulations that harness the strengths of the Single Market and partnerships, the aim is to enhance the resilience and diversification of these vital supply chains.

The roundtable explored collaborative strategies and  initiatives undertaken by organisations like  Terrafame, Trafigura, DPI, and Circular Materials to ensure the ethical sourcing, transparency, and security of supply of critical raw materials.

1. As the demand for critical raw minerals to fuel the energy transition surges, there is a growing need for responsible sourcing. To meet this dual demand, companies are seeking shorter supply chains.

The market for essential energy transition minerals has doubled in the last five years, now standing at a substantial $320 billion. Investment in critical minerals development jumped by 30% in 2022. Over the past five years, lithium production has more than tripled from 40 to 130 kt/year, accompanied by a six-fold increase in price. Copper production has nearly doubled from 100 to kt/year, and Nickel has grown significantly from 2,200 to 3,000 kt/year, with its value tripling.

Consumer preferences are shifting toward mindful consumption, prompting the clean technology sector to bring about significant changes in the traditional mining and metals industry. This transformation has two key aspects: the industry is implementing robust strategies to secure access to critical transition minerals, and stakeholders are working diligently to establish ethical and transparent supply chains.

As a result, industries are forming partnerships to streamline their supply chains. For instance, Terrafame and Renault Group have signed a multiyear agreement. Under this agreement, Terrafame will supply fully traceable low-carbon nickel sulfate for Renault Group’s electric vehicle batteries. Terrafame will provide sustainably produced nickel sulfate to Renault for approximately 200,000 electric vehicles annually. This partnership represents a significant milestone in creating a transparent and sustainable European battery cluster.

Debate brief

Shortening supply chains also facilitates the flow of data. Ethics and human rights in mining are increasingly important for consumer-facing companies, which are pushing for greater transparency. Trafigura has observed a growing interest in responsible sourcing, with major brands keenly interested in on-the-ground activities. Social performance and transparency in the supply chain, including pricing, are critical aspects, and both large brands and consumers require accurate information about supply chains.

The financial community also plays a crucial role in promoting transparency. Offering financial incentives to players committed to promoting supply chain data could be a potent motivator.

2. Ethics and human rights are pivotal in ensuring secure supply chains.

In conventional industries like mining, human rights emerge as a prominent concern in ethically sourcing raw materials. Addressing human rights issues, including the formalisation of informal mine workers, is essential for enhancing supply chain security.

Concerns have arisen about potential supply shortages in copper, lithium, and nickel over the next two decades. To underscore the importance of human rights, consider the case of cobalt. With the increasing global demand for lithium-ion batteries to power electric vehicles, cobalt faces one of the most challenging supply chains among critical materials. Each new EV requires a substantial amount of cobalt, and demand is projected to significantly increase by 2030.

However, around two-thirds of global cobalt production originates from the Democratic Republic of the Congo (DRC), with limited production in other countries. This geographical concentration raises concerns about supply chain vulnerabilities, as most of the country’s industrialised extraction is controlled by a small number of players, with approximately 80% of exports going to China for refining. On the other hand, the Artisanal and Small-Scale Mining (ASM) sector could contribute up to 40% of total production, with hundreds of thousands of miners working in challenging conditions.

Due to the sector’s difficulty in regulation and the human rights issues it poses, upstream companies often exclude ASMproduced materials from their supply chains. Trafigura believes this approach is counterproductive and is working on formalising and professionalising ASM activity in the DRC to improve the lives of ASM workers.

Simple interventions like safety measures and clean water can significantly enhance conditions in artisanal mining.

3. Moving Beyond Risk Management Towards Greater Value Creation: The Rise of Two-Way Value Chains.

3.1 Supply Chain Management: From Risk Management to Value Creation.

Social justice and development are central to discussions about critical raw materials. Producer countries, including the Democratic Republic of Congo (DRC), Nigeria, and Namibia, have imposed export restrictions or bans, which have complex implications for international trade dynamics. These measures aim to overcome the legacy of the “natural resources curse” from colonial times.

Including the perspectives of less-heard stakeholders is crucial to addressing structural inequalities in the sector. The nonprofit Development Partner Institute (DPI Mining) collaborates with major consumer goods companies to investigate human rights issues in their metals supply chains through a multistakeholder visioning process. This approach opens up new avenues for collaboration on topics that directly serve the needs of communities. The Development Partner Institute has also established RESCO, the Responsible Sourcing Coalition, serving as a knowledge exchange hub to accelerate mining’s transformation. Their work advocates for a shift from a risk management mindset to one of long-term value creation in supply chain management.

3.2 Beyond Supply Chain Integration: the rise of the two-sided value chain.

In addition to shortening supply chains, there is growing interest in creating a two-way flow from the mine to the user and back. Companies are exploring control over the entire value chain, including recycling. The circular economy is gaining prominence in the critical metals market, with investments in Copper, Lithium, Nickel, and Platinum exceeding $40 billion in 2022. Battery recycling investments grew by more than 35%, surpassing those for lithium extraction and refining, which grew by 30%.

Technology developments are offering new solutions for metal recovery, although market adoption takes time. Circular Materials, for example, pioneers innovative metal recovery solutions from industrial waste with a circular approach. Their technology efficiently recovers metals, achieving over a 99% reduction in dissolved metals and repurposing materials on-site. Supported by the European Commission, their patented technology delivers cleaner water and purer metals, reducing environmental impact and reliance on virgin resources. Their aim is to transform linear value chains, offering greater environmental sustainability, reduced reliance on virgin raw materials, and optimised production cycles to their customers and partners.

Cooperation among players at different supply chain stages is essential to promote the circular economy. In an established industry like mining, introducing new technologies for enhanced metal recovery and circularity is a challenge that will require time and a commitment to developing technology demonstrators.  

Overall, the conversation underscores the trend of supply chains promoting mutual value creation. First, by shifting focus toward generating mutual value for all stakeholders in the value chain. Second, through the circular economy and the rise of recycling solutions, value creation will flow in both directions along the chain. 

Cooperation among industry players will serve as a catalyst for a secure, ethical, and transparent supply of critical raw materials to support the energy transition.