McKinsey: Clean Energy sees Critical Minerals Supply Crisis
Ensuring sufficient critical minerals are available to support the deployment of low-emissions technologies will require significant scale-up of their extraction and refining, a new McKinsey report says.
The report – The hard stuff: Navigating the physical realities of the energy transition – stresses how the energy transition is in its early stages, with only an estimated 10% of required deployment of low-emissions technologies by 2050 achieved in most areas.
McKinsey's report details how critical minerals are vital to produce batteries, wind turbines, electric motors, and electrolyzers, and that they are a vital enabler of decarbonisation across domains.
The report categorises minerals into four application groups for the energy transition.
- Battery metals, including cobalt, graphite, lithium and nickel, power electric vehicles and grid storage systems
- Permanent magnet materials, comprising rare earth elements, enable electric motors and wind turbines
- Infrastructure metals, including copper and aluminium, form electrical networks
- Speciality metals support hydrogen production and solar power generation
McKinsey says current mineral supply meets between 10 and 35% of projected 2050 requirements. This assessment comes under the consultancy's Achieved Commitments scenario, which models countries meeting their stated climate pledges.
The authors identify supply expansion speed as a primary constraint. They highlight uncertainties around material substitution technologies. Performance impacts of alternative materials require evaluation.
McKinsey MineSpan reveals supply crisis
McKinsey reveals demand for seven minerals could double before 2030. These comprise lithium, cobalt, nickel, dysprosium, terbium, neodymium, and praseodymium. Each serves specific functions in clean energy applications.
The consultancy forecasts nickel demand will increase by 100%. Dysprosium and terbium requirements could expand by 400%. Lithium demand faces a potential 700% surge.
Low-emissions technologies will drive more than 50% of critical mineral demand by 2030, McKinsey says. For lithium and rare earth elements, clean technology could comprise 90% of demand.
The report reveals peak demand growth will occur before 2030. This timing aligns with rapid deployment of new clean energy technologies under net-zero scenarios. Post-2030 demand growth continues at reduced rates.
Supply projections through McKinsey MineSpans, the company's mining industry analytics platform, indicate significant shortfalls. The platform forecasts supply-demand gaps across multiple minerals by 2030.
Dysprosium and terbium supply could fall 75% below demand requirements. Lithium production may miss demand targets by 40%. Four of eight examined minerals face supply deficits even including announced projects.
Global minerals supply impacts mining sector
The International Energy Agency (IEA), which advises governments on energy policy, forecasts supply-demand imbalances. The Energy Transitions Commission, representing energy sector leaders, shares these concerns. The International Renewable Energy Agency (IRENA), coordinating global renewable energy development, predicts similar shortfalls.
McKinsey's analysis shows critical mineral resources remain sufficient underground. Copper, lithium, and nickel reserves continue expanding through exploration. Development timelines create production bottlenecks.
The IEA calculates average project timelines of 17 years from discovery to production. Copper and nickel developments require 13 to 19 years. Lithium projects achieve faster completion at five years.
Critical minerals demand sees mining skills shortage
Industry vacancy rates illuminate the skills crisis. Australian mining job openings have doubled since 2020. Mining engineering graduates in Australia have decreased 60% since 2014. United States mining engineering completions dropped 40% since 2016.
Processing capacity presents additional challenges. Cobalt and lithium refining expands within two years where expertise exists. Rare earth elements and battery-grade graphite demand complex processing capabilities. New regions building refining capacity require decades to develop expertise.
Geographic concentration is also impacting supply chain resilience, the report authors say. The Democratic Republic of Congo, for example, produces 75% of cobalt, while China processes 60% of all rare earth elements.
