2024 Critical Minerals Review: Turbulence and Optimism for 2025
The critical minerals sector faced a turbulent 2024, as new supply outpaced short-term demand growth in immature markets, causing a sharp decline in prices. This pricing pressure slowed deal-making activity and limited financing options for many developers. Despite these challenges, the outlook for 2025 remains optimistic, driven by long-term demand growth, increasing government support, and rising merger and acquisition (M&A) activity.
Critical minerals like lithium hydroxide, lithium carbonate, and spodumene experienced dramatic price drops of over 80% from their 2022 and 2023 highs. However, renewed optimism stems from sustained growth in electric vehicle (EV) sales, projected to rise 17% annually between 2023 and 2026. Australia’s lithium exports alone are forecast to exceed \$10 billion by 2026, while copper consumption—a key driver of the global energy transition—is expected to grow by 2.5% in 2025 and 3.2% in 2026. Although prices are unlikely to return to their 2022 peaks, structural demand for critical minerals and a narrowing market surplus will likely support a medium-term price rebound. The cyclical nature of mining means delays in investment today could exacerbate supply shortages, positioning companies that weather the downturn to benefit from future upswings.
M&A activity in the sector has shown significant momentum, with major deals continuing through 2024. Notable transactions include the Allkem-Livent merger valued at \$10 billion, Rio Tinto’s proposed \$10 billion acquisition of Arcadium Lithium, and SQM and Hancock Prospecting’s \$1.7 billion purchase of Azure Minerals. While fewer deals were completed in 2024 compared to 2023, the total deal value surged to \$14.8 billion—a sharp increase from \$5.3 billion in the prior year. Lithium remains the dominant driver, accounting for \$24 billion in deal value since 2020. Lower interest rates in the U.S. and Europe, coupled with improving commodity prices, are expected to fuel a further rebound in M&A activity in 2025.
As traditional greenfield project financing becomes increasingly challenging due to price volatility, developers have turned to alternative funding sources. Government-backed financial support and customer offtake agreements have emerged as critical tools, offering flexible solutions such as prepayments and convertible note structures. Government lenders continue to play a pivotal role during early development phases, and as interest rates decline, major domestic and international lenders are likely to reengage in financing operational projects.
Government involvement in critical minerals is expected to rise further as nations counterbalance China’s dominance in processing and manufacturing. Australia, for instance, committed \$7.1 billion over 11 years to refine and process critical minerals, including targeted support for Western Australia’s lithium sector. The U.S. has implemented significant tariffs on Chinese EV exports and expanded tax incentives for domestic mineral extraction, while the EU imposed import duties on Chinese battery electric vehicle producers. Global efforts, such as the Minerals Security Partnership Finance Network, are also fostering international collaboration to secure critical minerals supply chains.
However, greater scrutiny of foreign investments remains a concern, particularly in Australia, where critical minerals deals are subject to stringent national interest protections. While regulators emphasize the need to protect domestic resources, the absence of clear guidance on acceptable investment structures creates uncertainty for foreign investors. As investment models evolve to include equity positions, debt-like instruments, and governance participation, improved clarity from regulators will be essential to ensure continued capital inflows.
Looking ahead to 2025, the critical minerals sector is poised for transformation. Prices are expected to recover steadily as structural demand grows, M&A activity rebounds, and governments strengthen their role in supporting supply chains. Developers will increasingly rely on creative financing strategies to bring projects to fruition, while geopolitical considerations will continue to shape investment trends. With critical minerals at the heart of the global energy transition, 2025 promises to be a pivotal year for the sector.
