IEA: Critical Mineral Demand Set to Surge Through 2040 as Supply Gaps Persist for Key Metals

The International Energy Agency (IEA) projects that demand for critical minerals will continue to rise rapidly through 2040, primarily driven by the deployment of clean energy technologies such as electric vehicles (EVs), battery storage, renewables and electricity grids, according to its Global Critical Minerals Outlook 2025 (iea.org).

In the Stated Policies Scenario (STEPS), which reflects current policy settings, lithium demand is set to grow fivefold from today’s levels by 2040. Graphite and nickel demand are projected to double over the same period. Demand for cobalt and rare earth elements is expected to increase by 50-60%, while copper demand grows by about 30%. Battery deployment in EVs and storage is the main driver for lithium, nickel, cobalt and graphite, with grid electrification and construction supporting copper needs. Permanent magnets for EVs and wind power boost rare earth demand (iea.org).

Meeting this demand will require substantial capital. Around USD 500 billion in new mining investment is needed between now and 2040 under STEPS, rising to about USD 600 billion in the Announced Pledges Scenario (APS) where demand grows faster. These figures account for rising capital intensity due to declining ore grades, particularly for copper (iea.org).

While announced projects improve overall supply-demand balances for some minerals compared with earlier assessments, major gaps persist. Expected mined supply from existing and announced projects falls short of projected demand in 2035 by around 30% for copper and 40% for lithium in the STEPS. The copper shortfall is especially concerning because of declining ore grades, higher project costs, fewer new discoveries and long development lead times. Lithium markets look well supplied in the near term but are projected to move into deficit in the 2030s, though new project development prospects are stronger than for copper (iea.org; iea.org).

For nickel and cobalt, long-term supply gaps are narrowing if planned projects proceed on schedule. Rare earth elements appear sufficiently supplied based on the pipeline, though concentration risks remain high for rare earths and graphite. Mining concentration is projected to stay elevated or increase for copper, nickel and cobalt by 2035, while some diversification is expected for lithium, graphite and rare earths. Refining remains highly concentrated, with China set to supply over 60% of refined lithium and cobalt and around 80% of battery-grade graphite and rare earth elements in 2035 (iea.org).

High geographic concentration creates vulnerability even when global balances appear adequate. An N-1 analysis excluding the largest supplier shows remaining supplies covering only 35-40% of remaining demand for graphite and rare earths in 2035, less than 55% for nickel, and about 65% for lithium and cobalt (iea.org).

The IEA notes that scaling recycling could reduce the need for new mining by 5-30% by 2040 in STEPS (higher under stronger climate scenarios) and cut associated greenhouse gas emissions significantly. Investment in collection and recycling infrastructure is required to realise this potential. The agency also highlights policy support, diversification efforts and mechanisms such as price stabilisation or volume guarantees as necessary, given that capital costs for projects outside dominant producers are typically around 50% higher (iea.org; iea.org).

A subsequent 2026 Outlook update indicated that projected supply deficits for copper and lithium through 2035 had narrowed somewhat (copper to about 25%) due to project advances, though gaps persist and new risks emerged for cobalt from policy changes by major producers (iea.org). Demand growth and concentration challenges continue to shape the outlook for energy transition minerals.