IEA Warns That Low Diversity in Critical Mineral Markets Poses Threat to Global Energy Transition
The International Energy Agency (IEA) has raised alarms over the concentrated supply chains of critical minerals, warning that low diversity in production and processing could severely hinder the progress of the global clean energy transition.
In its latest market report, the IEA underscores how the rapid scaling of electric vehicles (EVs), renewable energy systems, and battery storage has triggered a surge in demand for key materials such as lithium, cobalt, nickel, graphite, and rare earth elements. However, a lack of supply diversity has created geopolitical vulnerabilities and market instability that threaten the resilience of green technologies.
Supply Concentration Reaches Critical Levels
According to the IEA, a handful of countries dominate the extraction and processing of essential minerals:
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China accounts for over 70% of global rare earths production and nearly 90% of their processing.
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Indonesia and the Philippines lead in nickel supply, while Chile and Australia dominate lithium extraction.
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Cobalt production is heavily concentrated in the Democratic Republic of Congo (DRC), which supplies about 70% of global output.
This high level of concentration increases exposure to political risk, export controls, labor unrest, environmental disruption, and trade disputes.
IEA Executive Director Fatih Birol stated:
“The clean energy economy is being built on a foundation of critical minerals. But without diverse, secure, and sustainable supply chains, we risk slowing the pace of the energy transition.”
Emerging Challenges for Industry and Governments
The IEA warns that insufficient investment in mineral exploration, recycling, and alternative sources could lead to supply-demand mismatches, volatile prices, and disruptions to green technology deployment. Already, some manufacturers of EV batteries and wind turbines have reported delays and cost spikes due to material shortages.
Moreover, protectionist policies, such as export bans and strategic stockpiling, are exacerbating the issue. In the last year alone, countries like China and Indonesia have tightened their grip on mineral exports, citing national interest and environmental concerns.
Policy Recommendations
To counter these risks, the IEA urges governments and industry stakeholders to take a proactive role in:
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Diversifying supply sources geographically, including through partnerships in Latin America, Africa, and parts of Asia.
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Increasing investment in exploration and development of untapped reserves.
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Building midstream and downstream processing capacity in more countries, especially within OECD members.
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Accelerating circular economy strategies, including recycling and substitution of critical minerals.
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Strengthening international cooperation and transparency in mineral supply chains.
The IEA also advocates for improved environmental and social governance (ESG) standards across the entire value chain to ensure that supply diversification does not come at the cost of sustainability or human rights.
Industry Response: Cautious Optimism
Industry groups have largely welcomed the IEA’s report, acknowledging the urgency of diversifying supplies. However, they also emphasize the long lead times and capital intensity of mineral development projects.
Some companies are exploring vertical integration to reduce exposure to market volatility, while others are investing in mineral recycling technologies to reduce dependence on primary sources.
Meanwhile, countries like the United States, Canada, Australia, and members of the European Union are actively pursuing critical minerals strategies to bolster their domestic capacities and secure strategic partnerships.
Looking Ahead
As the world accelerates toward net-zero emissions, the pressure on mineral supply chains will only intensify. Without decisive action to improve diversity and resilience, the IEA warns that the ambition of a global green energy future could become a victim of resource fragility.
“We cannot afford to swap one dependency for another,” the IEA concluded. “Strategic planning and international collaboration are essential to avoid a bottleneck that could derail global climate goals.