This page belongs to: Critical Minerals Strategy 2023–2030

Operating environment

What are critical minerals?

Critical minerals are metallic or non-metallic materials that are essential to our modern technologies, economies and national security, and whose supply chains are vulnerable to disruption. Risks of disruption to critical mineral supply chains are heightened when mineral production or processing is concentrated in particular locations, facilities or companies.

Why are critical minerals important?

Critical minerals, including rare earth elements, are used to manufacture key technologies. This includes the technologies that will help us transition to net zero emissions, such as:

  • electric vehicles (EVs)
  • batteries
  • permanent magnets
  • wind turbines
  • solar photovoltaics (PV)
  • hydrogen electrolysers
  • energy-efficient technologies like LEDs.

Critical minerals, and the technologies they enable, have important applications across a range of sectors such as:

  • defence
  • space
  • energy
  • transport
  • agritech
  • medicine
  • computing
  • telecommunications.

Global supply chains operate most efficiently when they are diverse and transparent. Supply chains that are highly concentrated are fragile, volatile and unreliable. In these cases, markets cannot adequately price and manage risks, meaning businesses cannot compete on a level playing field. As a result, there is a role for governments to work with the private sector to build diverse, resilient and sustainable critical minerals supply chains.

The global context

The world’s total demand for minerals necessary for the development of clean energy technologies is forecast to double or even quadruple by 2040 (IEA 2021).

By 2030 EVs will represent more than 60 per cent of vehicles sold globally (IEA 2022b). Demand for battery minerals, such as lithium, is forecast to increase by 40 times 2020 levels by 2040, while demand for cobalt and graphite could rise by approximately 20 times. Demand for rare earth elements could increase by seven times in the same period (IEA 2021). More mining is required to meet this demand. Recent analysis by the IEA suggests the world will need around 50 new lithium mines, 60 new nickel mines and 17 new cobalt mines to meet carbon emissions goals by 2030 (IEA 2022a).

Bringing online sufficient new supply of the minerals needed to meet increasing demand in time is a significant challenge. New mining, processing and manufacturing projects can take more than 10 years to reach production, particularly when doing so in a sustainable way supported by local communities. Bringing these projects online requires expertise, capability and substantial investment to overcome technical and commercial challenges.

Despite these barriers, global investors are beginning to mobilise, particularly in response to national policy commitments to reach net zero by 2050. Internationally, governments are creating frameworks to encourage private sector innovation and capital into diversifying and expanding clean energy technology supply chains. This includes the United States’ Inflation Reduction Act, the European Union’s Critical Raw Materials Act and Japan’s Economic Security Act. These frameworks seek to incentivise local or regional supply chains through tax credits, government investment, regulation, project facilitation and strategic reserves.

These frameworks will profoundly influence investment flows by spurring the deployment of technologies and driving the expansion and diversification of clean energy supply chains. Over the next 6 to 12 months industry will be locking in investment decisions that will set their direction for many years to come.