By: Nghiinomenwa Erastus

Electric cars’ battery packs, green power, and solar power require special metals such as lithium, cobalt, copper, and silicon, while wind turbines require iron and aluminium. 

Various critical metals are critical in the clean energy transition, as the world vow to move from carbon-emitting vehicles and energy sources.

This is according to October World Economic Outlook and a new International Monetary Fund (IMF) new Staff Paper.

However, the world has not adequately documented the reserve level and supply of such minerals to enable the transition.

The paper projects that an 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”. 

The paper explained that such needs could send metal demand and prices surging for many years.

Based on IMF research, a typical electric vehicle battery pack needs around 8 kilograms of lithium, 35 kilograms of nickel, 20 kilograms of manganese and 14 kilograms of cobalt.

While charging stations require substantial amounts of copper.

Solar panels use large quantities of copper, silicon, silver, and zinc for green power, while wind turbines require iron ore, copper, and aluminium.

Metal prices have already seen significant increases as economies re-opened, highlighting a critical need to analyze what could constrain production and delay supply responses. 

The IMF suggests an assessment of whether there are enough mineral and metal deposits to satisfy the needs for low-carbon technologies and best address factors that could restrain mining investment and metals supplies.

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% to 60%, boosted by solar, wind, and hydropower. 

Fossil fuels would then shrink from almost 80% per cent to about 20%.

The IMF research explained that replacing fossil fuels with low-carbon technologies would require an eightfold increase in renewable energy investments and cause a substantial increase in demand for metals.

However, developing mines is a process that takes a very long time- often a decade or more and presents various challenges at both the company and country level.

Given the projected increase in metals consumption through 2050 under a net-zero scenario, “current graphite, cobalt, vanadium, and nickel production rates appear inadequate, showing a more than two-thirds gap versus the demand”.

Revealed the IMF research papers. 

The current copper, lithium and platinum supplies are also inadequate to satisfy future needs, with a 30% to 40% gap versus demand.

For some minerals, existing reserves would allow greater production through more extraction investment, such as graphite and vanadium.

For other minerals, current reserves could constrain future demand- especially lithium and lead, but also for zinc, silver, and silicon, the IMF assessment shows.

Importantly, however, metal reserves and production are not static.

Firms can expand reserves through innovation in extraction technology, and further exploration efforts may increase the future supply of metals to meet future demands.

Moreover, metals recycling can also increase supplies- reuse of scrap metals only occurs on a large scale for copper and nickel. Still, the paper highlighted that it’s now increasing for some scarcer materials like lithium and cobalt.

The IMF researchers have also highlighted another complicating factor, some important supplies are generally very concentrated. 

This implies that a few producers will benefit disproportionately from growing demand. 

“Conversely, this lays bare energy transition risks from supply bottlenecks should investments in production capacity not meet demand, or in case of potential geopolitical risk inside or between producer nations,” the paper stated.

The Democratic Republic of the Congo, for example, accounts for about 70% of cobalt output and half of the reserves. 

The role is so dominant that the energy transition could become more difficult if the country can’t expand mining operations. 

Similar risks apply to China, Chile, and South Africa, which are all top producers for some metals most crucial to the energy transition. 

Breakdowns or disruptions in their institutions, regulations, or policies could complicate supply growth.

FINANCING CONCERNS

The IMF researchers have also found insufficient financing for metals and mining investment due to growing investor focus on environmental, social, and governance considerations, or ESG.

Mining involves environmental impacts and fuels global warming, albeit just a fraction of coal and gas generation.

Reduced access to financing by lower ratings could constrain production, adding another potential supply-chain bottleneck. 

In response, miners are trying to reduce their carbon footprint. 

While deposits are broadly sufficient, the needed ramp-up in mining investment and operations could be challenging for some metals and maybe derailed by market- or country-specific risks. Email: erastus@thevillager.com.na