Metals Demand From Energy Transition May Top Current Global Supply

IMF Blog, December 8, 2021

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Canonical URL: Metals Demand From Energy Transition May Top Current Global Supply

Authors: Nico Valckx, Martin Stuermer, Dulani Seneviratne, Prasad Ananthakrishnan
Published: December 8, 2021

The clean energy transition needed to avoid the worst effects of climate change could unleash unprecedented metals demand in coming decades, requiring as much as 3 billion tons.
A typical electric vehicle battery pack needs around 8 kilograms (18 pounds) of lithium, 35 kilograms of nickel, 20 kilograms of manganese and 14 kilograms of cobalt; charging stations require substantial amounts of copper.
Solar panels use large quantities of copper, silicon, silver and zinc; wind turbines require iron ore, copper, and aluminum.
The needed ramp-up in mining investment and operations could be challenging and mining development often takes a decade or more.

Under the International Energy Agency’s Net-Zero by 2050 Roadmap:
- The share of power from renewables would rise from current levels of around 10 percent to 60 percent.
- Fossil fuels would shrink from almost 80 percent to about 20 percent.
- Replacing fossil fuels with low-carbon technologies would require an eightfold increase in renewable energy investments.
Projected production gaps versus demand through 2050 under a net-zero scenario:
- Graphite, cobalt, vanadium, and nickel: more than two-thirds gap versus the demand.
- Copper, lithium and platinum: a 30 percent to 40 percent gap versus demand.
Some minerals’ current reserves could allow greater production with more extraction investment (examples noted: graphite and vanadium), while other minerals’ current reserves could be a constraint (examples noted: lithium and lead, and also zinc, silver, and silicon).
Metal prices have already seen large increases as economies re-opened, highlighting potential for prolonged price surges if supply cannot respond.

Metal reserves and production are not static: firms can expand reserves through innovation in extraction technology and further exploration may increase future supply.
Metals recycling can augment supplies:
- Reuse of scrap metals occurs on a large scale primarily for copper and nickel.
- Recycling is now increasing for some scarcer materials like lithium and cobalt.

Important supplies are often highly concentrated among a few producers, creating distributional benefits and risks:
- The Democratic Republic of the Congo accounts for about 70 percent of cobalt output and half of reserves.
- China, Chile, and South Africa are top producers for some metals crucial to the energy transition.
Supply growth could be complicated by breakdowns or disruptions in institutions, regulations, or policies in major producing countries.

Insufficient financing for metals and mining investment is a related challenge, driven in part by growing investor focus on environmental, social, and governance considerations (ESG).
Mining involves environmental impacts and contributes to global warming, though the piece notes it is just a fraction of coal and gas generation per a World Bank report on the mineral intensity of the energy transition.
S&P Global analysis findings:
- The ESG average score of the S&P Global 1200 stood at 62 out of 100.
- The metals and mining sector’s ESG score rose to 52 in the latest year from 39 in 2018.
IMF analysis of S&P 1200 firms shows mining companies that raised their ESG ratings from 2018 to 2020 also saw an increase in debt and equity financing.
Efforts to unlock more green financing are aided by global initiatives such as the World Bank’s Climate-Smart Mining Initiative and IMF support for greening the recovery and promoting green finance.

The world needs more low-carbon energy technologies to keep temperatures from rising by more than 1.5 degrees Celsius, and the transition could unleash unprecedented metals demand.
While deposits are broadly sufficient in many cases, the needed ramp-up in mining investment and operations could be challenging for some metals and may be derailed by market- or country-specific risks.
Key policy priorities implied by the analysis:
- Scale up exploration and extraction-technology innovation to expand reserves where feasible.
- Expand metals recycling, especially for scarcer materials like lithium and cobalt.
- Mobilize green financing and improve mining-sector ESG performance to unlock capital for mining investment.
- Monitor and mitigate geopolitical and concentration risks in producer countries to avoid supply bottlenecks.

IMF Blog post by Nico Valckx, Martin Stuermer, Dulani Seneviratne, and Prasad Ananthakrishnan, December 8, 2021.

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