Investors are pouring in capital, but little new mining capacity is coming online, By Alex Irwin-Hunt, FDI Intelligence
While the energy transition has created an exuberance of investment into the manufacturing of battery and electric vehicles (EVs), investment into critical minerals mining has struggled to keep up.
In the first three quarters of 2022, foreign investors announced greenfield battery and EV manufacturing projects worth more than $63bn, according to the latest data from fDi Markets. By comparison, only $7.34bn was pledged by foreign investors in greenfield metal and mineral extraction projects.
This massive split in capital expenditure will inevitably add additional pressure to an already tight critical minerals market. Demand from battery producers for metals such as lithium, nickel and cobalt is rising quickly, despite little new mining capacity is coming online.
Global demand for copper is expected to grow from 25 million metric tonnes (MMT) today to 35 MMT by 2035, according to S&P Global, with supply falling short by nine MMT.
Besides, while mining projects can take as many as 10 to 20 years to start production after a deposit is discovered, battery production operations can take as little as three years to start production.
Caspar Rawles, chief data officer at Benchmark Mineral Intelligence, describes this imbalance in lead time as “the great raw material disconnect”, noting that the deficit in markets for commodities such as lithium will continue until new raw material operations come online.
“Those companies can make the decision to find a plot of land and get a plant built,” says Mr Rawles. “But when it comes to raw material supply it takes a lot longer.”