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Energy Shift

Visualizing China’s Dominance in Clean Energy Metals

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Visualizing China’s Dominance in Clean Energy Metals

Visualizing China’s Dominance in Clean Energy Metals

Renewable sources of energy are expected to replace fossil fuels over the coming decades, and this large-scale transition will have a downstream effect on the demand of raw materials. More green energy means more wind turbines, solar panels, and batteries needed, and more clean energy metals necessary to build these technologies.

Today’s graphic, based on data from the International Energy Agency (IEA), illustrates where the extraction and processing of key metals for the green revolution take place.

It shows that despite being the world’s biggest carbon polluter, China is also the largest producer of most of the world’s critical minerals for the green revolution.

Where Clean Energy Metals are Produced

China produces 60% of all rare earth elements used as components in high technology devices, including smartphones and computers.

The country also has a 13% share of the lithium production market, which is still dominated by Australia (52%) and Chile (22%). The highly reactive element is key to producing rechargeable batteries for mobile phones, laptops, and electric vehicles.

China's ShareExtractionProcessing
Copper 8%40%
Nickel 5%35%
Cobalt 1.5%65%
Rare Earths 60%87%
Lithium13%58%

But even more than extraction, China is the dominant economy when it comes to processing operations. The country’s share of refining is around 35% for nickel, 58% for lithium, 65% for cobalt, and 87% for rare earth elements.

Despite being the largest economy in the world, the U.S. does not appear among the largest producers of any of the metals listed. To shorten the gap, the Biden administration recently launched an executive order to review the American strategy for critical and strategic materials.

It’s also worth noting that Russia also does not appear among the top producers when it comes to clean energy metals, despite being one of the world’s leading producers of minerals like copper, iron, and palladium.

Low Regulation in the Clean Metal Supply Chain

While China leads all countries in terms of cobalt processing, the metal itself is primarily extracted in the Democratic Republic of Congo (DRC). Still, Chinese interests own 15 of the 17 industrial cobalt operations in the DRC, according to a data analysis by The New York Times and Benchmark Mineral Intelligence.

Unfortunately, the DRC’s cobalt production has been criticized due to reports of corruption and lack of regulation.

Part of the Congolese cobalt comes from artisanal mines with low regulation. Of the 255,000 Congolese artisanal miners, an estimated 40,000 are children, some as young as six years old.

The Rise of Clean Energy Metals

The necessary shift from fossil fuels to renewable energy opens up interesting questions about how geopolitics, and these supply chains, will be affected.

In the race to secure raw materials needed for the green revolution, new world powers could emerge as demand for clean energy metals grows.

For now, China has the lead.

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Electrification

Where are Clean Energy Technologies Manufactured?

As the market for low-emission solutions expands, China dominates the production of clean energy technologies and their components.

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Visualizing Where Clean Energy Technologies Are Manufactured

When looking at where clean energy technologies and their components are made, one thing is very clear: China dominates the industry.

The country, along with the rest of the Asia Pacific region, accounts for approximately 75% of global manufacturing capacity across seven clean energy technologies.

Based on the IEA’s 2023 Energy Technology Perspectives report, the visualization above breaks down global manufacturing capacity by region for mass-manufactured clean energy technologies, including onshore and offshore wind, solar photovoltaic (PV) systems, electric vehicles (EVs), fuel cell trucks, heat pumps, and electrolyzers.

The State of Global Manufacturing Capacity

Manufacturing capacity refers to the maximum amount of goods or products a facility can produce within a specific period. It is determined by several factors, including:

  • The size of the manufacturing facility
  • The number of machines or production lines available
  • The skill level of the workforce
  • The availability of raw materials

According to the IEA, the global manufacturing capacity for clean energy technologies may periodically exceed short-term production needs. Currently this is true especially for EV batteries, fuel cell trucks, and electrolyzers. For example, while only 900 fuel cell trucks were sold globally in 2021, the aggregate self-reported capacity by manufacturers was 14,000 trucks.

With that said, there still needs to be a significant increase in manufacturing capacity in the coming decades if demand aligns with the IEA’s 2050 net-zero emissions scenario. Such developments require investments in new equipment and technology, developing the clean energy workforce, access to raw and refined materials, and optimizing production processes to improve efficiency.

What Gives China the Advantage?

Of the above clean energy technologies and their components, China averages 65% of global manufacturing capacity. For certain components, like solar PV wafers, this percentage is as high as 96%.

Here’s a breakdown of China’s manufacturing capacity per clean energy technology.

Technology China’s share of global manufacturing capacity, 2021
Wind (Offshore)70%
Wind (Onshore) 59%
Solar PV Systems85%
Electric Vehicles71%
Fuel Cell Trucks 47%
Heat Pumps39%
Electrolyzers41%

So, what gives China this advantage in the clean energy technology sector? According to the IEA report, the answer lies in a combination of factors:

The mixture of these factors has allowed China to capture a significant share of the global market for clean technologies while driving down the cost of clean energy worldwide.

As the market for low-emission solutions expands, China’s dominance in the sector will likely continue in the coming years and have notable implications for the global energy and emission landscape.

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Energy Shift

The ESG Challenges for Transition Metals

Can energy transition metals markets ramp up production to satisfy demand while meeting ever-more stringent ESG requirements?

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The ESG Challenges for Transition Metals

An accelerated energy transition is needed to respond to climate change.

According to the Paris Agreement, 196 countries have already committed to limiting global warming to below 2°C, preferably 1.5°C. However, changing the energy system after over a century of burning fossil fuels comes with challenges.

In the above graphic from our sponsor Wood Mackenzie, we discuss the challenges that come with the increasing demand for transition metals.

Building Blocks of a Decarbonized World

Mined commodities like lithium, cobalt, graphite and rare earths are critical to producing electric vehicles (EVs), wind turbines, and other technologies necessary to burn fewer fossil fuels and reduce overall carbon emissions.

EVs, for example, can have up to six times more minerals than a combustion vehicle.

As a result, the extraction and refining of these metals will need to be expedited to limit the rise of global temperatures.

Here’s the outlook for different metals under Wood Mackenzie’s Accelerated Energy Transition (AET) scenario, in which the world is on course to limit the rise in global temperatures since pre-industrial times to 1.5°C by the end of this century.

MetalDemand Outlook (%) 2025203020352040
Lithium +260%+520%+780%+940%
Cobalt +170%+210%+240%+270%
Graphite+320%+660%+940%+1100%
Neodymium+170%+210%+240%+260%
Dysprosium+120%+160%+180%+200%

Graphite demand is expected to soar 1,100% by 2040, as demand for lithium is expected to jump 940% over this time.

A Challenge to Satisfy the Demand for Lithium

Lithium-ion batteries are indispensable for transport electrification and are also commonly used in cell phones, laptop computers, cordless power tools, and other devices.

Lithium demand in an AET scenario is estimated to reach 6.7 million tons by 2050, nine times more than 2022 levels.

In the same scenario, EV sales will double by 2030, making the demand for Li-ion batteries quadruple by 2050.

The ESG Challenge with Cobalt

Another metal in high demand is cobalt, used in rechargeable batteries in smartphones and laptops and also in lithium-ion batteries for vehicles.

Increasing production comes with significant environmental and social risks, as cobalt reserves and mine production are concentrated in regions and countries with substantial ESG problems.

Currently, 70% of mined cobalt comes from the Democratic Republic of Congo, where nearly three-quarters of the population lives in extreme poverty.

Country2021 Production (Tonnes)
🇨🇩 Democratic Republic of the Congo120,000
🇦🇺 Australia5,600
🇵🇭 Philippines4,500
🇨🇦 Canada4,300
🇵🇬 Papua New Guinea3,000
🇲🇬 Madagascar2,500
🇲🇦 Morocco2,300
🇨🇳 China2,200
🇨🇺 Cuba2,200
🇷🇺 Russia2,200
🇮🇩 Indonesia 2,100
🇺🇸 U.S.700

Around one-fifth of cobalt mined in the DRC comes from small-scale artisanal mines, many of which rely on child labor.

Considering other obstacles like rising costs due to reserve depletion and surging resource nationalism, a shortfall in the cobalt market can emerge as early as 2024, according to Wood Mackenzie. Battery recycling, if fully utilised, can ease the upcoming supply shortage, but it cannot fill the entire gap.


Rare Earths: Winners and Losers

Rare earths are used in EVs and wind turbines but also in petroleum refining and gas vehicles. Therefore, an accelerated energy transition presents a mixed bag.

Using permanent magnets in applications like electric motors, sensors, and magnetic recording and storage media is expected to boost demand for materials like neodymium (Nd) and praseodymium (Pr) oxide.

On the contrary, as the world shifts from gas vehicles to EVs, declining demand from catalytic converters in fossil fuel-powered vehicles will impact lanthanum (La) and cerium (Ce).

Taking all into consideration, the demand for rare earths in an accelerated energy transition is forecasted to increase by 233% between 2020 and 2050. In this scenario, existing producers would be impacted by a short- to medium-term supply deficit.


The ESG dilemma

There is a clear dilemma for energy transition metals in an era of unprecedented demand. Can vital energy transition metals markets ramp up production fast enough to satisfy demand, while also revolutionising supply chains to meet ever-more stringent ESG requirements?

Understanding the challenges and how to capitalise on this investment opportunity has become more important than ever.

Sign up to Wood Mackenzie’s Inside Track to learn more about the impact of an accelerated energy transition on mining and metals.

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