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Not enough mineral supply to meet looming energy demand, says U.S. report

S&P Global says U.S. facing critical minerals supply crunch as high and green tech sectors take off
(S&P Global Twitter)

There are challenges in sourcing the four major minerals needed to make the transition to the net-zero economy in the U.S.

S&P Global released a report this week forecasting that the demand for lithium, nickel, cobalt and copper will be substantially higher – 23 times higher – by 2035 than was originally forecasted in 2021, before the passage of Washington’s Inflation Reduction Act (IRA)

Lagging regulatory regimes when it comes to permitting new mines could become a factor in a looming supply crunch, the study finds.

S&P Global said the demand from decarbonization technologies, such as electric vehicles, charging infrastructure, solar PV, wind and batteries, will continue to accelerate and be materially higher for lithium (+15 per cent), cobalt (+14 per cent) and nickel (+13 per cent) by 2035 than was projected before the IRA was enacted last August.

The report points out that although copper is not listed by the U.S. government as a critical mineral, the demand for copper is projected to be 12 per cent higher by 2035 than originally projected. Copper is considered the “metal of electrification,” make it obviously vital to the energy transition.

The S&P study, entitled Inflation Reduction Act: Impact on North America Metals and Minerals Market, looks at demand for the four metals for major applications such as power generation, transmission and distribution and end-markets, like electric vehicles. The study compares demands the current demand to available supply. 

S&P said the IRA is accelerating demand for critical minerals vital to energy transition technologies, – metals like lithium, nickel and cobalt – according to the analysis piece.

Overall, the forecasted demand for these minerals before and after the IRA came into force will be 23 times higher in 2035 than it was in 2021.

The Inflation Reduction Act has little to do with solving inflation. It is a stimulus piece of legislation passed in Washington in August 2022 that is designed to spur investment, activity and growth in the high tech and green tech sectors toward achieving a goal of a net zero greenhouse gas producing U.S. economy.

2035 is the Biden Administration’s ambitious target to reach 100 per cent carbon pollution-free electricity sector and a net zero emissions economy by 2050.

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There domestic content rules in the act.

To qualify for IRA tax credits, mining and processing critical minerals must take place in the U.S. or a country that has a free trade agreement with the U.S., which includes Canada.

Of the four minerals analyzed in the study, there appears to be sufficient available supply of lithium given the States’ trade agreements with Chile, Canada and Australia. 

Cobalt and nickel are unlikely to be sourced at levels high enough to meet demand.

The U.S. relies on Chile for 60 per cent of its refined copper imports. For Chile, the U.S. accounts for only 20 per cent of its refined copper exports. The paper identified there could be a future global competition to secure additional supplies from the South American country.

The report said what must be factored into the equation when it comes to mineral imports is the sense of urgency when it comes to the long lead times and permitting complexities that prolong development of mines in the U.S.

S&P Global data on 127 mines around the world that started production between 2002 and 2023 shows that a major new mineral resource discovery today wouldn’t go into production until 2040 or later.

The study said copper represents the biggest opportunity is the untapped 70-million ton endowment within the U.S., equivalent to more than 20 years of domestic copper demand, even at the anticipated peak demand in 2035.

“Timely and transparent permitting is a fundamental operational challenge to supplying metals for the energy transition, particularly in developed markets such as the United States that have high levels of transparency and both political and civil society scrutiny of policy,” said Mohsen Bonakdarpour, executive director, S&P Global Market Intelligence, in a news release.

“Expediting permitting reform while meeting environmental and community concerns has become a central topic in boosting mineral supply for the energy transition.”