Promising prospects for Canada in global transition to new energy world

TORONTO—There are hopeful prospects for Canada in the global transition to the new energy world, with the accelerating demand for critical and rare earth minerals. It was a global market already worth US$320-billion last year, and one that will grow significantly for years to come. But Canada so far is a small participant, and we will have to push harder to do better. We are far from a world leader in the energy transition despite our constant boasting. We have potential. But so do many other countries. We have many junior companies—many quite entrepreneurial—and, in fact, exploration for critical minerals rose 40 per cent in Canada last year. But we have little presence among the large critical mineral mining firms—Teck is the only one, and it may become a foreign takeover target. Almost all the large mining companies operating here are foreign multinationals. Likewise, many enterprising businesses pursuing lithium in Canada are also from other countries. Canada is moving ahead with its $3.8-billion Critical Minerals Strategy, the clean-energy manufacturing tax credit, the critical minerals research, development and demonstration project, and the critical minerals centre of excellence. We will have to watch closely to see if they succeed as more than a branch-plant mining economy. The latest report on critical minerals from the International Energy Agency finds that the demand both for minerals and the capacity to refine and process them are soaring. Some 10 million electric vehicles were sold worldwide last year, 14 per cent of total vehicle sales compared to less than five per cent in 2020. And in the first quarter this year, worldwide sales are 25 per cent higher than the same time last year. It’s not just electric vehicles. As renewable energy—especially solar and wind—continues to soar, there is increasing demand for large-scale battery systems to store electricity. This demand doubled last year and is forecast to double again this year. Looking ahead, if all of the already-announced commitments for clean energy are met, then demand for critical minerals for clean energy is expected to grow from 10 megatonnes (Mt) in 2020 to 20 Mt in 2030, and to 30 Mt by 2050. If the net-zero emissions target for 2050 is to be met, then production would have to rise to 30 Mt by 2030 and 35 Mt by 2050, the IREA forecasts. In 2022, a handful of nations dominated both mined output and refined output worldwide. For copper, the top three countries accounted for 45 per cent of mined output, and 57 per cent of refined output. For lithium, the top three countries accounted for 91 per cent of mined output, and 99 per cent of refined output. For nickel, the top three nations accounted for 65 cent of mined output, and 66 per cent of refined output. For cobalt, the top three producers accounted for 82 per cent of mined output, and 90 per cent of refined output. For graphite, the top three producers accounted for 90 per cent of output, and 100 per cent of refined output. And for rare-earth minerals, the top three countries accounted for 88 per cent of mined output, and 100 per cent of refined output. But can future supplies keep up with the rapid pace of demand, and can those supplies come from diversified sources? While there has been a significant up-tick in exploration activities, if there is to be sufficient supply of battery-ready minerals to achieve net-zero emissions by 2050, new reefing and processing facilities in particular will be essential. Problems include long lead times, project execution delays and cost overruns. “There is an important distinction between technology-grade products and battery-grade products, which generally require higher-quality, high-purity outputs and involve a lengthy process to be qualified by end users,” the IEA warns. Moreover, new operations generally have higher production costs, so many suppler possibilities will find it harder to come on-stream. While it’s possible to see growing diversity in the supply of needed minerals, this is not the case for refined capacity. China accounts for half of the world’s planned new lithium chemical facilities, and Indonesia accounts nearly 90 per cent of planned new refined nickel plants. At the same time, many resource-rich nations— like Indonesia, Chile, Argentina, Mexico, Namibia and Rwanda—are seeking to capture more of the value-added from their resources, not only producing the minerals, but also playing a much bigger role in refining. Given its strong position in refining, the IEA expects that China will also be a strong competitor for new mineral supplies, looking to Africa, Latin America, Central Asia, and countries in Southeast Asia. Between 2018 and the first half of 2021, Chinese companies invested US$4.3-billion to acquire lithium assets, twice the amount invested by businesses from the United States, Australia, and Canada combined. China is also investing in processing, refining, and downstream facilities in other regions often to secure strategic access to raw materials. Diversification of refining and processing operations is a major challenge. According to the IEA report, “the industry has historically favoured concentrated global ‘hubs’ that specialize in the metallurgical and chemical transformations necessary for high-tech applications” so that “supply chains for refining and processing have become more concentrated than those for mining.” Investors in new facilities face many challenges including limited access to technology, skills and supply chains. Incumbent players such as Chinese companies, the IEA says, “possess a substantial advantage through their access to a skilled workforce, well-established supply chains and accumulated technological expertise” which, the IEA notes, “often translates into higher capital costs, creating barriers to entry for new players, who may struggle to compete on the same resources and capabilities.” China is expected to account for the largest share of planned refining projects for key minerals from 2023, followed by Indonesia, Chile, Australia and Argentina. The United States and Canada are much lower on the radar. Canada is getting projects. But if we want to be a major player, then we have much more work to do. We have no business already calling ourselves a world leader. David Crane can be reached at crane@interlog.com. The Hill Times