Appl Ex 9c

Application Exercise 9c: The next mining boom for Australia

  1. Critical minerals are minerals, or organic chemicals, used in the manufacture of technologically advanced and low-emission energy production, including electric cars.


  1. Demand for critical minerals is expected to rise in the future as nations look to achieve their emissions reductions target and switch to alternative energy sources that use less fossil fuels.


  1. Derived demand refers to the demand for specific resources that arises from demand for the goods and services the resources are used to produce. For example, a rise in the demand for woollen jumpers will increase the (derived) demand for wool and sheep. As more households move away from petrol powered vehicles toward electric ones, there will be lower demand for petrol as a source of fuel and therefore the derived demand for oil, used to produce petrol will fall.  At the same time, there will be more derived demand for the critical minerals used in the production of batteries for electric cars. Less demand for oil will also reduce the labour resources needed to mine oil, however, this will be offset somewhat by the increased demand for mining labour required for the extraction of critical minerals.


  1. The global price of lithium will rise in the short term as it is in short supply and in high demand, resulting in consumers of lithium “bidding up” its price. However, in the long run, more mining companies are likely to allocate their scarce resources to mining lithium, resulting in an increase in supply.  Greater availability of lithium will therefore lead to downward pressure on the price.