The Global Energy Transition and Critical Minerals | Bulletin – October 2025

Introduction

A worldwide, multisector transition to decrease greenhouse fuel emissions is underway. Adoption of renewable
power over the previous decade has been typically sooner than anticipated, alongside a larger-than-expected
decline within the relative prices of manufacturing, partly pushed by coverage help in China and elsewhere.
While annual international emissions haven’t but peaked, these developments are contributing to a gradual
shift in demand away from commodities like coal and oil and in the direction of commodities which can be used
extensively in clear power applied sciences.

‘Critical’ minerals are broadly outlined as these which can be vital for the functioning of
fashionable applied sciences or economies, or for nationwide safety, and are weak to provide chain
disruptions. The Australian Government maintains an inventory of crucial minerals, which presently
contains 31 minerals, and updates the checklist every so often in response to adjustments in demand
and provide circumstances and expertise (DISR 2024).

Our article focuses on the crucial minerals which can be used extensively in clear power expertise
as a result of these minerals have the best potential to change into vital for the Australian financial system
ought to international demand develop strongly as projected by the International Energy Agency (IEA). This subset
(known as crucial minerals on this article) contains lithium, nickel, cobalt, graphite, uncommon
earths, and copper (Table 1). While copper will not be on Australia’s checklist of
crucial minerals, we embody it right here as a result of it’s a main part in most clear power
applied sciences and it’s extensively recognised as a crucial mineral by different main economies, together with
China, the European Union and the United States.

Critical minerals are weak to provide shortages as a consequence of a mix of things. While it’s
potential that demand for crucial minerals might develop quickly, provide is basically mounted within the quick
run as a result of it takes a very long time to develop mines. It can take crucial mineral tasks greater than
10 years to go from the exploration to the manufacturing stage, although this time interval can range by
mineral and worth incentives (Australian Government 2023). Critical mineral deposits and refining
capacities additionally are typically far more concentrated geographically than different minerals, and so they’re
notably weak to geopolitical and provide chain disruptions. For instance, uncommon earths
deposits are virtually totally concentrated in three international locations, and a lot of the world’s crucial
minerals refining capability is positioned in China (Americo, Johal and Upper 2023).

Developments within the crucial minerals sector, each in Australia and globally, might be an vital
determinant of how Australia’s function as a useful resource exporter could change as a part of the worldwide
power transition. Increased financial exercise in Australia’s crucial minerals sector –
for instance, as a consequence of extra funding and exports – might a minimum of partially offset the anticipated
decline in exercise from decrease international demand for fossil gas exports (Kemp, McCowage and Wang 2021).

In this text, we offer some background on Australia’s crucial minerals sector, earlier than then
exploring how the demand for crucial minerals might evolve within the medium-to-long time period and the way this
would possibly have an effect on the scale of Australia’s crucial minerals sector. We refer to 2 extensively used
benchmark international power transition eventualities and focus particularly on the potential influence on export
volumes, moderately than export values or Australia’s phrases of commerce. Export values can develop
strongly and increase nationwide revenue even when volumes are little modified. However, by anchoring our
evaluation of the long-term outlook round international mineral demand progress projections, we implicitly
assume a rise within the common relative worth of minerals that’s per these benchmark
eventualities and that Australia’s price of manufacturing relative to the worldwide common is unchanged
over time. Scenario evaluation is a great tool as a result of there may be substantial uncertainty round how
future expertise and local weather coverage developments will have an effect on the velocity and method wherein the
international power transition proceeds and therefore the availability and demand for crucial minerals. That mentioned,
the eventualities that we discover are two of many potential future states and embed very explicit
assumptions about how local weather insurance policies and the relative worth of various power applied sciences will
evolve sooner or later.

Australia’s crucial mineral sector

Australia has massive endowments and is a vital international producer and exporter of some crucial
minerals. It is the world’s largest producer of lithium and one of many prime 5 producers and
exporters of cobalt and uncommon earths (Graph 1). Most of Australia’s crucial mineral
deposits and mines are in Western Australia, with a big share of the mined minerals processed
offshore in key export markets, together with China, the United States, Japan and Malaysia. While
Australia is a key exporter of those minerals, crucial mineral exports presently comprise a small
share of Australia’s useful resource exports (Graph 2).

Various crucial mineral tasks are presently underway in Australia that purpose to spice up
Australia’s manufacturing and processing capabilities, although most of those are nonetheless being
assessed for viability, and so they’re unlikely to extend Australia’s manufacturing within the close to
time period as a consequence of lengthy lead occasions. Australia’s processing and refinery capabilities are additionally anticipated
to develop modestly within the close to time period based mostly on the present pipeline of tasks.

In latest years, authorities coverage has sought to encourage non-public funding in crucial minerals
tasks. The Australian Government’s Critical Minerals Strategy 2023–2030 units out a framework for rising Australia’s crucial
mineral sector and contains home funding services designed to help crucial mineral
exploration and manufacturing, in addition to worldwide partnerships (Australian Government 2023). The
Future Made in Australia plan additionally contains insurance policies geared toward rising the sector, together with budgeted
spending and production-linked tax incentives (Australian Government 2024). As this text was
being finalised, the United States and Australia have agreed to a framework to help the
provide of uncooked and processed crucial minerals and uncommon earths essential to the business and
defence industries of the United States and Australia.

Global crucial mineral costs play a big function in incentivising Australian funding and
manufacturing. In 2021, accelerated progress within the adoption of electrical automobiles (EV) globally and
expectations for sturdy future demand progress contributed to a pointy enhance within the costs of many
crucial minerals (Graph 3). In response to the elevated costs, funding in and provide of
lithium and nickel on the time have been scaled up extra shortly than anticipated. With provide
rising in more moderen years, costs have declined considerably (DISR 2025a), and this has
affected Australian funding and manufacturing of crucial minerals. The RBA’s liaison program
means that some late-stage lithium tasks have been delayed in 2024, and a few working mines delayed
funding, ready for a sustained pick-up in costs. Production at a number of mines was additionally paused
throughout 2024 as a consequence of issues about profitability.

Assessing the outlook for crucial minerals demand

As international developments are vital in shaping traits within the Australian crucial minerals sector, we
first take into account the worldwide outlook for crucial minerals demand earlier than then assessing the related
implications for Australia. We use the IEA’s international mineral provide and demand volumes
projections, which cowl your complete mineral and steel worth chain from mining to refining. The
eventualities we take into account are simply two of many potential future states, and there’s a massive diploma of
uncertainty concerning the international transition to decrease emissions. Importantly, the IEA eventualities are usually not
offered as forecasts nor as assessments of desired power transition paths for the world. We use
them right here as benchmarks which have been immediately translated into mineral demand projections.

Climate coverage eventualities

A key supply of uncertainty pertains to local weather coverage and whether or not coverage measures might be ample
to attain emissions discount objectives. To take into account the coverage outlook, we use two of the IEA’s
local weather policy-based reference eventualities:

• Stated Policies Scenario (STEPS)
• Announced Pledges Scenario (APS).

STEPS assumes that local weather insurance policies which can be both presently applied or beneath growth as at
the top of August 2024 are preserved all through the situation horizon. Commitments and targets that
have been introduced are usually not assumed to be met on this situation until present insurance policies are ample
to satisfy them. The insurance policies embody ones which can be a part of massive nationwide decarbonisation reforms, such
because the Inflation Reduction Act of 2022 (IRA) within the United States and the Fit-for-55 package deal
within the European Union, although some insurance policies embedded in STEPS are actually outdated (e.g. latest US coverage
adjustments have accelerated the termination of EV and clear electrical energy funding tax credit within the
IRA).

APS is a extra bold coverage situation that assumes that every one local weather targets which have been introduced
by international locations, together with commitments made beneath the Paris Agreement, are met in full and on time
no matter whether or not a rustic’s local weather coverage is ample to attain these targets. APS
additionally assumes that every one OECD international locations apply the identical economy-wide carbon costs (or their coverage
equivalents) as one another, as do rising and growing international locations with web zero pledges. In
observe, insurance policies usually tend to proceed to evolve in an uncoordinated method.

Uncertainty round expertise developments

Another supply of uncertainty is the event of expertise, as new and extra environment friendly or
various applied sciences might have an effect on relative demand for minerals immediately, in addition to not directly
via implications for local weather insurance policies. We use mineral projections from the IEA’s Global
Energy and Climate Model, which is conditioned on a set of assumptions concerning the tempo of decline in
manufacturing prices of unpolluted applied sciences, starting from EVs to progressive applied sciences like iron-based
metal manufacturing with carbon seize (IEA 2024a).

In observe, totally different technological assumptions can drive main qualitative and quantitative
variations. For instance, totally different fashions utilized by the Network for Greening the Financial System
(NGFS) of their eventualities can venture a distinction of round US$95 billion in international power
storage funding over the following 5 years. Policies can assist form these technological
growth paths (e.g. China’s long-running coverage help for EV uptake and photo voltaic photovoltaic
(PV) manufacturing has pushed price discount in, and widespread deployment of, these applied sciences), however
the local weather targets and investments that international locations decide to nonetheless rely upon expectations round
future expertise developments.

Global outlook for crucial minerals

Demand

IEA projections point out that the power transition will drive the sharpest progress in demand for
lithium, in addition to a big enhance in demand for copper, graphite and nickel (Graph 4).
Demand for batteries within the EV sector is the principle driver of this projected progress (Graph 5). To put
the dimensions of potential progress in perspective, even in STEPS, which doesn’t assume any enhance in
local weather coverage ambition over time, the combination market worth of key crucial minerals is predicted to
develop to roughly 45 per cent of the 2023 international iron ore market by 2030. Much of
this progress is concentrated within the short-to-medium time period and is supported by present coverage settings.
Lithium demand is predicted to develop at a mean compound annual charge of round 14 per cent
to 2030, with the extra bold coverage in APS rising this by round two proportion factors every
yr (Graph 4). This partly displays the same assumed charges of technological change throughout
the 2 eventualities and is probably not a function of all potential eventualities.

IEA eventualities like APS spotlight that extra bold insurance policies translate to bigger mineral demand
estimates. However, coverage uncertainty might additionally current draw back dangers to the medium-term demand
outlook that’s implied by these eventualities. Recent coverage developments – together with higher
restrictions on and accelerated phaseout of sure clear power tax credit beneath the IRA within the
United States, elevated export bans on crucial minerals and bilateral tariffs – have
elevated uncertainty round costs and the tempo of unpolluted expertise deployment in some areas.
Although these coverage adjustments will seemingly gradual the tempo of adoption moderately than reverse it (Economist
2025), demand estimates might be weaker than projected if present insurance policies embedded in IEA eventualities
are considerably unwound.

Uncertainties round technological developments not captured by the eventualities usually tend to
have an effect on long-term projections. The IEA anticipate EV battery demand to develop robustly regardless of uncertainties
as a consequence of how a lot costs have declined and ongoing coverage help in most international locations (IEA 2024b; IEA
2025), although improvements within the chemistry mixture of batteries might change the relative demand for
minerals over time. How the dimensions and relative price of power storage
applied sciences develop will immediately have an effect on demand projections for battery minerals. They may also
closely affect the extent to which intermittent photo voltaic and wind power can substitute coal within the
power combine and the way fuel might be used to supply dependable energy for electrical energy grids in the long run,
in flip affecting demand for different clear applied sciences utilized in renewable power technology and
electrical energy grids.

Supply

To examine in opposition to the demand projections, we use the IEA’s estimates of mined mineral output
based mostly on current and introduced mining tasks as a conservative estimate of provide. Together, the
estimates recommend that there could also be inadequate provide of crucial minerals by 2035 to satisfy the
required demand beneath STEPS, notably for copper and lithium (Graph 6). However, these
projected ‘shortfalls’ within the medium and long run are prone to be overstated, because the
estimates don’t account for a way endogenous worth adjustments might encourage provide to increase. If
firm funding choices have been based mostly on extra conservative assumptions of demand than what
STEPS implies is required, there might be upside dangers to mineral costs and provide in response. As
we’ve got much less details about tasks that may affect provide out to 2040, unannounced tasks
might additionally start inside that timeframe. Alternatively, the projected ‘shortfall’ might
indicate that STEPS is presently unrealistic, and future realisation of weaker precise demand might drive
common costs decrease than the extent wanted to attain the STEPS demand projections. Nevertheless, the
danger of worth volatility stays elevated within the short-to-medium time period as a consequence of these demand
uncertainties and the lengthy growth timelines of some minerals, and it will weigh on funding
and manufacturing incentives in Australia.

Australian outlook for crucial minerals

In this part, we discover the outlook for Australian crucial minerals manufacturing till 2050. We use
Australian provide projections from the IEA and the Department of Industry, Science and Resources
(DISR) to 2030 (based mostly on present and introduced mining tasks in Australia) and lengthen this to 2050
by assuming that Australian provide grows on the similar charge as international demand within the IEA STEPS and APS
eventualities. However, this long-term outlook for
Australia’s crucial mineral manufacturing is extraordinarily unsure. Whether Australian manufacturing
will develop according to international demand will rely upon a spread of home and international elements, together with
authorities coverage, technological developments, developments in international costs relative to Australian
producers’ marginal prices and different elements that decide the viability of Australian tasks
reminiscent of exploration success and mine approvals.

Medium time period

The IEA and DISR provide projections recommend that Australia’s manufacturing of lithium, uncommon earths,
and copper will enhance strongly over the following 5 years, however this might be considerably offset by a
materials decline within the manufacturing of nickel (Graph 7). The projected enhance displays new
tasks, in addition to the growth of current mines (e.g. Greenbushes and Mount Holland in Western
Australia), whereas the projected decline in nickel manufacturing displays decrease costs, leading to
tasks being cancelled and the scaling again of manufacturing at current operations. There is a few
uncertainty, nonetheless, across the magnitude of this decline. DISR tasks that the decline in nickel
manufacturing might be round half the scale of the estimates within the IEA projections. Export
worth projections from DISR recommend that exports of lithium, copper and nickel will account for
round 10 per cent of Australia’s useful resource exports in 2030 (DISR 2025b), in contrast with
the modest share of round 6 per cent at present.

Developments in international demand for crucial minerals, which can drive mineral costs, are a key
uncertainty on this medium-term outlook. Low costs for crucial minerals have halted manufacturing and
delayed funding plans at some Australian mines in recent times. If international demand doesn’t pick-up
as projected and costs stay low, there’s a danger that manufacturing will increase by lower than assumed in
these provide projections, with tasks being delayed or cancelled and working mines remaining
closed. Alternatively, if international demand grows extra shortly than projected, and important mineral
costs enhance considerably relative to the value of Australia’s different useful resource exports, the
crucial minerals share of useful resource exports might be materially greater than projected and the
crucial mineral sector might change into extra vital for the Australian financial system.

Long time period

In the long run, progress in Australian manufacturing will rely upon the worldwide competitiveness of
Australian crucial mineral producers. By assuming that Australian provide grows according to international
demand in STEPS, we implicitly assume that Australia’s marginal price of manufacturing adjustments in
line with international marginal prices over time. Under this assumption, Australian manufacturing grows
strongly between 2030 and 2050, with progress pushed by lithium as international lithium demand is predicted to
be round 2.5 occasions greater in 2050 than in 2030 (Graph 8). In the bold APS
projections, Australia’s annual crucial mineral manufacturing might be round 1.5 occasions
greater in 2050 than in 2030. Although, in a situation wherein the power transition and progress in
international demand are slower, crucial mineral manufacturing would enhance by lower than within the STEPS and
APS projections.

In the long term, the scale of the crucial minerals sector in Australia may also rely upon
productiveness in Australia and the way a lot value-adding exercise is captured onshore. As mentioned above,
Australian Government coverage goals to develop Australian producers’ involvement in downstream
actions. IEA projections for refined manufacturing, that are based mostly on present tasks, recommend that
Australia’s processing and refinery capabilities will develop modestly till 2040, and a lot of the
refinery of lithium, uncommon earths, and cobalt is predicted to proceed to happen in China,
Indonesia and Malaysia. Contacts within the RBA’s liaison program observe that Australia’s
comparatively excessive enter prices make it much less internationally aggressive in growing this capability.
Firms have additionally reported that some downstream processing operations require specialised skillsets
which can be presently troublesome to seek out within the Australian labour market.

Conclusion

In Australia, latest international worth declines have halted the manufacturing of some minerals and delayed
funding plans, such that progress in manufacturing is prone to stay subdued. Recent coverage
bulletins could present help for funding. Medium-term provide projections recommend that
Australia’s manufacturing of lithium and copper might enhance strongly over the following 5 years,
although mixture crucial mineral manufacturing progress is buffered considerably by anticipated declines within the
manufacturing of nickel. In the long run, funding and manufacturing of crucial minerals might enhance
strongly in Australia, noting that some local weather coverage eventualities recommend international demand will develop
strongly.

However, the magnitude of each long-term international demand projections and Australian manufacturing stays
topic to appreciable uncertainty. The path of coverage and technological developments might be key
determinants of relative mineral demand and the general tempo of worldwide mineral demand progress. Whether
Australian manufacturing grows according to international traits will rely upon future authorities coverage,
developments in international costs, exploration success, whether or not Australian producers can keep or
enhance worldwide competitiveness, and the way a lot value-adding exercise is captured onshore.

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