Lithium Demand to Triple by 2040, Energy Transition at Risk – IEA

Climate strategies built on rapid electrification face a material reality check. The IEA’s projection that lithium demand will triple and copper will grow by over 25% by 2040 underscores that the energy transition is first and foremost a mineral transition. Supply deficits in these critical inputs risk derailing climate timelines, making immediate action on refining diversification, recycling, and sustainable mining as urgent as emissions targets themselves.

The International Energy Agency’s latest Global Critical Minerals Outlook delivers a stark warning: demand for minerals essential to the clean energy transition and modern electronics will surge dramatically by 2040, while supply-side vulnerabilities—especially in refining—threaten to create persistent gaps. Under its Stated Policies Scenario (STEPS), total investment in mining and refining must exceed $750 billion between now and 2040 to keep pace. This figure is dominated by copper ($310 billion) and nickel ($280 billion), reflecting their central roles in electrification, batteries, and infrastructure. The report projects lithium demand to more than triple by 2040, graphite demand to double, and nickel demand to rise 65%. Rare earth elements, critical for permanent magnets in wind turbines and EV motors, will see roughly 50% growth, while copper demand climbs over 25%, adding around 7 million tonnes. These numbers underpin the IEA’s bottom line: the world is not prepared for the scale of mineral extraction and processing needed.

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The report highlights that China accounts for just under 50% of global copper refining, 70% of lithium refining, 75% of cobalt refining, 85% of magnet rare-earth separation, and over 90% of battery-grade graphite production.

The supply side reveals a complex picture. On mining, a growing project pipeline offers some hope, but the IEA points to persistent supply gaps for copper and lithium extending through 2035. A new gap for cobalt has emerged, driven by export quotas introduced by the Democratic Republic of the Congo, which dominates global cobalt production. Nickel’s supply outlook has tightened compared with last year’s assessment. Yet the most acute vulnerability lies downstream. While mining investment is becoming more geographically diversified, refining and downstream processing remain extraordinarily concentrated in China. The report highlights that China accounts for just under 50% of global copper refining, 70% of lithium refining, 75% of cobalt refining, 85% of magnet rare-earth separation, and over 90% of battery-grade graphite production. This concentration creates a systemic choke point: even if new mines come online, a lack of refining capacity outside China could bottleneck supply and expose the world to geopolitical shocks.

The implications for markets and industries are profound. A structural supply deficit in copper and lithium would translate into sustained upward price pressure, increasing input costs for electric vehicle manufacturers, battery producers, and renewable energy developers. For automakers racing to electrify their fleets, the availability of affordable battery-grade lithium, nickel, and cobalt is existential. Companies that fail to secure long-term offtake agreements or invest in recycling and alternative chemistries may find themselves unable to meet production targets. The refining concentration also raises the specter of export controls or tariffs, as seen in rare earths in the past, which could suddenly disrupt global supply chains.