Scientifically resolve the risk of supply of key energy metals

◎ Han Xiaoqin Wu Qiaosheng

In 2011, Continental was the first in the world to start the transformation of the energy system led by the industrialization of new energy vehicles, and seized the precious window period to gain a very rare first-mover advantage.

On the one hand, countries around the world are forced to make difficult choices on how to balance traditional energy security and transition, and on the other hand, under the consensus of "carbon neutrality", the global demand for key energy metals has increased sharply, especially in the case of extremely uneven distribution of resources, and the resource security strategy of major countries and changes in the status of industrial and supply chains will become the core elements of rewriting the global political and economic map. There is an urgent need to build a more sustainable, safe and inclusive future for critical energy metals.

It is of great significance to accelerate the deep integration between new energy and new materials, ensure the safety of key energy metals in the intensification of market volatility and the green and low-carbon revitalization of the domestic economy, scientifically resolve the risks of key energy metals in the mainland, accelerate the formation of new quality productivity of mineral resources, and remain invincible in the future adjustment of the global industrial chain and supply chain layout and resource competition.

1. The common scientific and technological innovation issues of new energy and new materials have become a decisive force to promote energy transition and even national economic development and sustainable industrial growth

At present, the world is in a period of great transformation of the energy system, and countries around the world are accelerating the transformation of the global energy system from a fossil fuel-based energy system to a green and low-carbon new energy system dominated by renewable energy.

A large number of emerging energy technologies such as renewable energy technology, energy storage technology, hydrogen energy technology and smart energy are accelerating iteration, becoming the core driving force for the global energy transition to green and low-carbon, promoting the transformation of the energy industry from resource- and capital-led to technology-led.

The industrialization of new materials has promoted the development of new energy, and the development of new energy in turn has put forward higher requirements for new materials. Cultivating new industries, promoting the deep integration of the new material industry and the energy system, and accelerating the formation of new quality productivity are the inevitable choices for comprehensively improving the upgrading of the energy industry base and the modernization of the industrial chain.

Compared with developed countries, the "structural deficit" phenomenon of key energy metals and deep-processed materials in the mainland is more prominent, and the output and scale have generally reached the world's top level, but due to the influence of many factors, they are basically locked in the middle and low end of the global value chain, and there are generally problems such as unsmooth industrial chain and supply chain, insufficient supply of resources, and the weak resilience of the industrial chain and supply chain has not been effectively solved. Developed countries continue to adjust the strategic layout of their industrial and supply chains for key products and technologies, and strive to strengthen the stability and independent controllability of their own supply chains, while using the vulnerability of other countries' critical energy metals and materials as a "bargaining chip" for malicious competition through international investigations and other governance methods.

The improvement of the supply security of critical energy metals and their deep-processed materials in mainland China is facing the dilemma of "no materials available, and materials are not ready to use" internally, and the risk of being technically "stuck" externally. "Carbon neutrality" provides a once-in-a-century opportunity for consolidating and enhancing the strategic advantages of the mainland's new energy industry, but it also faces new opportunities and risks.

2. Seize the window of opportunity for the restructuring of the industrial chain and supply chain, and efficiently coordinate the improvement of the supply of new energy and new materials in the whole chain

With the continuous advancement of energy transition, the role and status of key energy metals such as lithium, cobalt, and rare earth have become increasingly prominent, and the supply chain of the new energy industry chain is obviously subject to the safe supply of key energy metals. As an important support for the energy transition, the demand for critical energy metals will continue to increase in the next decade.

The International Energy Agency predicts that by 2040, the proportion of key metals required for new energy in the total demand for mineral resources will be as high as 40%~90%, and the scale of metals required for batteries will increase by 33 times, of which the demand for nickel, cobalt and manganese will increase by 140 times, 70 times and 58 times respectively. In addition to steel, copper, photovoltaic-grade glass, etc., there are also rare metals such as nickel, indium, gallium, germanium, tellurium, etc., and the three rare earth elements of neodymium, praseodymium and dysprosium contained in wind power are also facing serious shortages in the future, becoming an important constraint on the installation of wind power. It is estimated that by 2050, the total installed capacity of photovoltaics will reach 19 times that of 2020, and the demand for key energy metals such as indium and tellurium in photovoltaic manufacturing may exceed reserves.

Compared with traditional energy sources, which have a relatively stable market structure, the key energy metals market is still in its infancy, and there are a lot of opportunities in resource exploration, mining and recycling, and high-quality mine construction, with a large market scale and many possibilities for the evolution of market structure.

However, affected by factors such as resource geopolitics, major economies are gearing up for the commanding heights of the key energy metal industry chain and supply chain, and the vulnerability of the global critical energy metal industry chain and supply chain is highlighted. On the one hand, major resource-exporting countries have made great efforts to promote the localization of industrial and supply chains, and have successively introduced tightening policies, raising domestic mining taxes and restricting the export of raw material ores, which has further increased the global supply and demand gap of key energy metals and their products. The Indonesian government announced a ban on nickel ore exports in 2014 and 2020, and the Philippines also issued a ban on nickel ore exports. In December 2019, the Myanmar government closed the border on the grounds of environmental protection, causing the import of heavy rare earths from the mainland to be interrupted. The DRC raised cobalt royalties from 2% to 10% and imposed a 50% tax on excess profits. On the other hand, the United States and other developed countries in the West have built a "small courtyard and high wall" of the supply chain of key energy and metal industry chains, and the hegemony of resources and technology has exerted pressure on each other to comprehensively snipe at the Chinese market. On June 14, 2022, the U.S. Department of State announced that the U.S. and key partner countries including Canada, Australia, Finland, France, Germany, Japan, South Korea, Sweden, the United Kingdom, and the European Commission have established the Mineral Security Partnership (MSP) to strengthen critical minerals supply chains and secure the supply of critical minerals that are critical to clean energy and other technologies.

3. With the prevention of key energy metal supply risks as the core, accelerate the integration of new energy and new materials in the whole chain, and optimize the energy transition path

The National 14th Five-Year Plan and the Long-Range Objectives Through the Year 2035 have set up special chapters to make strategic arrangements for the overall development and security. As a large developing country, the mainland should learn from the successful experience of developed economies in ensuring the security of supply of critical metals, coordinate the overall international and domestic situations, improve the level of domestic prospecting and exploration, resource utilization, energy technology and international cooperation, build a supply guarantee system for critical metals that is compatible with the economic development level of the mainland, and build a solid foundation for the supply of primary products.

In the context of the acceleration of the global energy transition, the trend of promoting green and low-carbon energy in the mainland is irreversible, but the instability of the new energy system and the high cost of energy storage will continue for a certain period of time. At present, the mainland should maintain its strategic focus, and it is more necessary to identify the throat point of energy transition, jointly promote the deep integration of new energy and new material technologies, build a relatively complete service foundation for the new energy and new material industry, accelerate the formation of new quality productivity, and steadily promote its own energy transformation with the goal of building a resilient key metal supply chain industrial chain, assume due responsibility for responding to global climate change, contribute Chinese wisdom, and submit China's answer sheet.

First, on the basis of improving the cross-integration innovation ecosystem of new energy and new material technologies, we will strengthen the construction of the innovation chain of key energy metals and accelerate the formation of new quality productivity.

Based on strengthening the construction of national strategic scientific and technological forces, on the basis of comprehensively understanding the current situation of the construction of various scientific and technological service institutions in the new energy and new material industries, we will identify the breakpoints, stuck points, blocking points and weak links in the scientific and technological innovation service chain, systematically promote the construction of the deep integration project of the new energy and new material industry chain, and open up the breakpoints of the cross-integration of the new energy and new material industry chain. Encourage the establishment of new energy-new material industry cross-collaboration new R&D institutions, support the establishment of new energy-new materials cross-technology innovation alliance, set up new energy-new materials cross-innovation national major projects, and promote the improvement of the original innovation ability of the new energy-new materials cross-industry.

In conjunction with the National Development and Reform Commission, the Ministry of Science and Technology, the Ministry of Industry and Information Technology and other units, we will establish a new energy-new material technology industry foresight guidance institution, regularly carry out strategic research and release a technical list, roadmap and timetable for technological innovation breakthroughs in the cross-integration of new energy and new materials. Relying on the cross-collaborative innovation platform of new energy and new materials, we will carry out research on cutting-edge technologies of key metals, promote technological innovation achievements, strengthen the construction of key metal innovation chains, lay out supply chains, industrial chains and value chains around the innovation chain, fight the battle of key core technologies, continuously improve the overall efficiency of the innovation chain, and break through the constraints of key metals on energy transformation from the level of technological innovation.

The second is to establish a critical metal supply risk investigation and early warning mechanism, classify policies, and improve the national critical metal supply guarantee system.

The energy transition is a complex system project, which is deeply dependent on the disruptive technological breakthroughs of new materials and their security of supply. Its realization path faces a variety of choices and uncertainties, huge investment risks, very prominent spillover effects, and the fragility of the supply chain of new materials such as critical metals is everywhere, and the pursuit of absolute security of the supply chain can only be wishful thinking.

To this end, we must seize the various windows of technology, resources, industry, and international situation, take the research of cutting-edge technologies of new energy and new materials as the guide, accelerate the deep integration of the two, focus on the expansion of application scenarios of key metal materials in the field of new energy and the excavation of industrialization potential, and form industrial clusters and industrial parks for the effective supply of common technologies and public services for new energy and new materials, as well as public platforms and regional shared manufacturing platforms for application scenarios that serve the transformation of innovation achievements and the development of new markets. Based on the national conditions and the improvement of the competitiveness of the international market, we carry out supply chain risk investigation, regularly assess the vulnerability of the supply chain of critical metal raw materials and carry out early warning and monitoring, provide big data and traceability services for the whole industrial chain of critical metals and the whole process of exploration, development, consumption and trade for domestic and foreign markets, and continuously improve the critical metal supply security system with the goal of improving the resilience of the supply chain.

At the same time, according to the advantages and disadvantages of each critical metal in the international market, policies will be implemented according to the needs of the classification to enhance the security and resilience of the critical metal supply chain. For key metals with obvious advantages, such as rare earths, antimony, vanadium, molybdenum, etc., with high reserves and large output, domestic supply not only meets domestic demand, but also can supply a large number of international markets. It is suggested to improve the total mining control system in the life cycle, reasonably regulate the scale of mining, standardize the development order, continue to optimize the pattern of resource exploration and development allocation, and ensure the sustainable utilization of key technologies with strong advantages. For key metals with certain advantages, such as tungsten, indium, magnesium, titanium, etc., it has the advantage of resource reserves and output, but due to the small gap between global resource supply and demand or the improvement of resource recycling technology, the dependence of the international market on the supply of mainland resources is low. Consideration should be given to improving the reserve system of mineral areas and mineral products while controlling the total annual exports, avoiding unnecessary waste of resources such as price wars, and vigorously expanding its downstream industrial chain to stimulate domestic demand. For key metals with certain disadvantages, such as aluminum, tin, nickel, strontium, etc., there is no reserve advantage, but due to the impact of factors such as the low overlap of import source areas in the world's major economies, or the small amount of consumption in the downstream use link, the future market competition will not be too large. It is recommended to pay equal attention to domestic resource exploration and overseas mining development cooperation, and encourage qualified social capital to actively participate in exploration and development, so as to inject vitality into the mining market. At the same time, we will increase support for Chinese-funded enterprises to participate in the investment and financing of overseas high-quality resource exploration and development, and cultivate large-scale multinational mining groups with international competitiveness. For key metals with obvious disadvantages, such as cobalt, lithium, niobium, tantalum, etc., the mainland has poor resource reserve conditions, or the mining technology conditions are not yet mature, relying on foreign supply to maintain domestic consumption, and fierce competition with the United States, the European Union and other countries. It is recommended to vigorously expand overseas markets, actively build good trade relations, and increase overseas mining development. On the one hand, we should be highly vigilant against the Western economies led by the United States "stuck in China's neck", follow up in a timely manner, respond appropriately, and formulate corresponding countermeasures in a timely manner, so as to promote the formation of asymmetric advantages among economies and effectively resolve the risk of conflict; on the other hand, we should actively promote technological substitution and knowledge innovation in China, increase support for technological research such as resource separation, raw material innovation, and comprehensive recycling, and reduce the risk of the critical metal supply chain being "stuck" by the United States and other economies.

The third is to serve the underlying logic of the global energy transition, with the core of improving market discourse, and resolving the risks of the supply chain of critical metals from both the supply and demand ends.

On the supply side, it focuses on improving the degree of domestic critical metal geological survey and the level of international cooperation along the Belt and Road. At the domestic level, taking into account factors such as the geological characteristics of the occurrence of critical metals, the difficulty of mining, the existing reserves and market supply and demand, the central and local financial investment should be reasonably regulated, the mineral exploration of key metallogenic areas and important ore concentration areas should be deepened, the key metal target areas with strategic value should be delineated, the exploration investment of key metals such as lithium, cobalt and nickel should be increased in a targeted manner, the structure adjustment and layout optimization of exploration and mining types should be promoted, and the capacity to increase reserves and production capacity and the scale of mineral reserves should be improved. At the international level, it actively participates in the formulation of relevant international standards and rules for the exploration and mining of critical metals, promotes the internationalization of China's mining standards, builds a mutually beneficial and win-win international supply chain and industrial chain cooperation system with critical metals as the carrier, and enhances the global allocation capacity of critical metals in mainland China.

On the demand side, we should rationally lay out the new energy industry, avoid financial speculation caused by excessive transformation, actively solve the cost problem of efficient use of key metals, and stabilize transformation expectations. The efficiency of critical metals is related to the cost, schedule and feasibility of the energy transition, and it also greatly affects the supply risk of critical metals. It is suggested to focus on the R&D and application of efficient resource extraction, resource recycling, alternative resources and new materials, and break through a number of key core technologies that are "stuck in the neck". On the one hand, we should vigorously carry out the research and development of technologies for the efficient utilization of critical metals, improve the utilization efficiency of key metals, reduce the demand gap, strengthen the comprehensive recycling of resources, break through the technical "bottlenecks" of efficient lithium extraction, nickel and cobalt beneficiation and smelting, recovery of dispersed metals in industrial smelting, and metal recycling of retired batteries, and accelerate the transformation of R&D technological achievements; The new function solves the cost problem of high value-added utilization of critical metals, changes the long-term dependence on imports of high-end materials, promotes the whole industry chain to move towards the middle and high-end, and enhances the anti-risk ability of the critical metal supply chain.

[This article is a phased achievement of the major project of the National Social Science Foundation (23&ZD107), author's affiliation: China University of Geosciences (Wuhan)]