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Shifting supply chains: Navigating raw material challenges in the clean energy era

As the world transitions to clean energy technologies, supply chains are undergoing a transformation, pivoting away from fossil fuels towards non-fossil minerals. From lithium and nickel for batteries to copper and rare earth elements for various components, these materials are indispensable for driving the green transition.

Clean energy technologies are consuming an ever-growing share of these raw materials, yet supplies, especially of lithium and nickel, are struggling to keep pace with demand. Compounding the situation are uncertainties surrounding factors like the growth of electric vehicles (EVs), presenting significant challenges to raw material supply chains.

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To address these challenges, supply chains must remain stable yet flexible to adapt to uncertainties. They must become more resilient. In our latest report, we analyze the obstacles, uncertainties, and risks surrounding raw material supply chains, offering recommendations to enhance their resilience.

The Demand-Supply Dynamics The green transition is fueling exponential demand growth for critical raw materials. Sectors like solar energy, wind power, electricity networks, and EVs are expected to drive nearly 90% of lithium demand, 60-70% of nickel and cobalt demand, and over 40% of copper and rare earth element demand by 2040, according to the International Energy Agency.

The rapid expansion of battery technologies, particularly lithium-ion (Li-ion) cells for EVs and energy storage systems, is the primary driver of this demand surge. Market demand for Li-ion and sodium-ion (Na-ion) batteries is projected to soar from around 795 GWh in 2022 to almost 5,000 GWh in 2030.

Challenges and Risks However, uncertainties loom large over raw material supply chains. Factors like EV sales growth, raw material prices, geopolitical tensions, and the emergence of deep-sea mining could significantly impact these chains. Furthermore, the lengthy lead times involved in establishing new mining projects add to the uncertainties.

Approach to Resilient Supply Chains Resilient supply chains aim to mitigate these challenges by stabilizing operations, increasing flexibility, improving visibility, fostering collaboration, and balancing risks and costs effectively. Our report outlines a cyclical, scenario-based approach to building resilient supply chains, focusing on stability, flexibility, and contingencies.

Additionally, we propose risk containment measures targeting specific risk types, including financial hedging, long-term agreements, and technology investments. Secondary risks like skills shortages and intellectual property risks are also addressed.

Key Success Factors We identify five key success factors for resilient supply chains, from defining acceptable costs and risks to maintaining a competitive edge. With supply constraints already evident in processed lithium and nickel, swift action is imperative for raw material players to implement these strategies.

For further insights, download the full report or consult with one of our experts. We are eager to assist you in navigating the evolving landscape of raw material supply chains.

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