## Soaring Metal Prices May Delay Energy Transition

_IMF Blog, November 10, 2021_

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**Canonical URL:** [Soaring Metal Prices May Delay Energy Transition](https://www.imf.org/en/blogs/articles/2021/11/10/soaring-metal-prices-may-delay-energy-transition)

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## Bibliographic details
- Authors: Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx
- Published: November 10, 2021

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### Overview
- Authors: Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx
- Publication date: November 10, 2021
- Central finding: Clean energy needs may cause years of high prices for copper, nickel, cobalt, and lithium under a net-zero emissions by 2050 scenario, potentially reaching historical peaks for an unprecedented length of time and even delaying the energy transition itself.

### Net-zero scenario and demand projections
- Scenario focus: limiting global temperature increases to 1.5 degrees Celsius, using the International Energy Agency's (IEA) Net Zero by 2050 Roadmap as the reference.
- Projected demand changes under the roadmap’s ambitious scenario:
  - Lithium and cobalt consumption jumps more than sixfold.
  - Copper use would double.
  - Nickel use would quadruple (this includes meeting needs unrelated to clean energy).
- Timing: The demand surge is frontloaded because renewable energy components such as wind turbines or batteries need metals upfront.

### Metal prices and supply dynamics
- Price example for lithium: rise from its 2020 level around $6,000 a metric ton to about $15,000 late this decade—and stay elevated through most of the 2030s.
- General price outlook:
  - Cobalt, lithium, and nickel prices would rise several hundred percent from 2020 levels and peak around 2030.
  - Copper is less of a bottleneck; prices are estimated to peak as in 2011, though be elevated for longer.
- Supply response characteristics:
  - Copper, nickel, and cobalt largely come from mines, which require intensive investment and take on average more than a decade from discovery to production according to the IEA.
  - Lithium extraction from mineral springs and brine shortens lead times for new production to average roughly five years.
  - Supply trends also influenced by extraction technology innovation, market concentration, and environmental regulations.
- Market dynamics: Soaring demand combined with slower supply changes can spur prices to climb, and only eventually ease market tightness after 2030 as new production comes online.

### Macro-relevancy and economic impacts
- Aggregate production value: Under a net-zero emissions scenario, booming demand for the four energy transition metals alone would boost their production value sixfold to $12.9 trillion over two decades.
- Comparative statement: This could rival the roughly estimated value of oil production in a net-zero scenario over that period.
- Distributional effects:
  - Concentrated supply implies some top producers may benefit; countries with the largest output often have the greatest reserves and would be major prospective producers.
  - Example: The Democratic Republic of the Congo accounts for about 70 percent of global cobalt output and half of reserves.
  - Other notable producers: Australia (lithium, cobalt, and nickel); Chile (copper and lithium); Peru, Russia, Indonesia and South Africa.
- Macro effects on growth and fiscal balances:
  - A persistent 10 percent rise in the IMF metal price index adds an extra two-thirds of a percentage point to the pace of economic growth experienced by metals exporting countries relative to importing ones.
  - Exporters would see a similar magnitude of improvement for government fiscal balances from royalties or tax revenues.

### Policy implications and recommendations
- Key caveat: High uncertainty surrounding demand scenarios due to unpredictable technological change and the speed and direction of the energy transition; such ambiguity may hinder mining investment and raise the odds that high metal prices derail or delay the energy transition.
- Recommended policy actions:
  - Establish a credible, globally coordinated climate policy.
  - Enforce high environmental, social, labor, and governance standards.
  - Reduce trade barriers and export restrictions to allow markets to operate efficiently and direct investment to expand metal supply.
- Institutional proposal: An international body with a mandate covering metals—analogous to the IEA for energy or the UN Food and Agriculture Organization—could play a key role in data dissemination and analysis, setting industry standards, and fostering global cooperation.

*Source: Soaring Metal Prices May Delay Energy Transition, Lukas Boer, Andrea Pescatori, Martin Stuermer, Nico Valckx; November 10, 2021.*

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## Content in this bundle

- **Working Paper**
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## References

- [wrote](https://blogs.imf.org/2021/06/08/four-factors-behind-the-metals-price-rally/)
- [October World Economic Outlook](https://www.imf.org/en/Publications/WEO/Issues/2021/10/12/world-economic-outlook-october-2021)
- [IMF staff paper](https://www.imf.org/en/Publications/WP/Issues/2021/10/12/Energy-Transition-Metals-465899)
- [IMF metal price index](https://www.imf.org/en/Research/commodity-prices)

_Source: https://www.imf.org/en/blogs/articles/2021/11/10/soaring-metal-prices-may-delay-energy-transition_