Investment Opportunities, Sustainability Concerns Mount Over $16tr Global ‘Critical Minerals’ Market
L-R: Philip Jakpor, Board Secretary, Comrade Alagoa Morris, Member, Barrister Chima Williams, Board Chair, Comrade Constance Meju, Member and Elvira Jordan, EDEN Media Manager at the group’s Board Meeting in Uyo, Akwa Ibom State
- Demand For Lithium, Copper, Nickel, Cobalt, Others To Witness 475% Increase By 2050
- Fossil Fuel Emissions Will Continue Up To 2050 Because Of Rising Energy Demands
By Edu Abade
As pressure continues to mount for lower emissions and an end to extraction of fossil fuels globally, investment opportunities and sustainability concerns remain paramount in exploring what has been described as the ‘critical minerals’ market now projected at over $16 trillion in the next decade.
This follows a new research conducted by Mckinsey, a leading consulting firm, which identified gaps between supply and demand for critical metals, maintaining the gaps appear to be narrower than previous forecasts, but limp commodity prices mean investments in production are still lagging.
The consulting giant has long cautioned that demand for metals crucial to the energy transition, including lithium, nickel and copper, is likely to far outstrip supply over the next decade.
TradeBriefs reports that Mckinsey had repeatedly urged industry players, including commodity traders and lenders, to provide financial and advisory services to ensure production can be increased sufficiently, particularly by supporting companies and projects in the mining sector.
A report published by McKinsey on Tuesday, September 17, 2024 revealed that supply of critical metals is “scaling up faster than expected,” meaning that expected supply-demand in 2035 is “more balanced compared with 2023 perspective.”
It also indicated that production of lithium and nickel has exceeded 2020 projections by nearly 20 percent, adding:
“Lithium has benefited from assets coming online more quickly than expected in Australia and the United States, as well as from an increase in China, while nickel’s ramp-up largely stems from assets in Indonesia.
“Nickel and cobalt have both moved from expected undersupply to oversupply in the past year, McKinsey adds. At the same time, demand has already shifted towards alternative materials in anticipation of supply gaps.”
However, the report also found that there are still anticipated supply shortfalls for several metals over the next decade, including gaps of 30-40 percent for lithium, 30-40 percent for rare earth elements and 10-20 percent for copper.
In the copper market, McKinsey says expected projects have not yet become operational and existing assets have decreased production more quickly than anticipated.
And despite the increase in lithium production, material demand is forecast to increase by as much as 475 percent by 2035.
To ensure supply can keep up with rising demand, the report says commodity price increases will likely be required to make financing more attractive.
International organizations have previously found low prices are causing the mining industry to delay projects, while commodity traders face further obstacles due to limited access to derivatives and hedging tools and opaque market pricing information.
Senior partner at McKinsey, Michel Van Hoey, said: “According to our analysis, there is currently sufficient financing capacity in the industry to scale up production, with $5.9 trillion in financing capacity available. However, the business case is not always attractive enough to incentivize investment.”
Van Hoey added that based on current pipelines, research suggests lithium prices would need to increase by around 30 percent, copper by 20 percent and nickel by 5 percent to strengthen supply sufficiently. The report suggests that such price increases appear unlikely in the immediate term.
The extreme market fluctuations and price volatility that characterized much of the post-pandemic period and resulted in record profits and cash accumulation by large commodity traders are “unprecedented in scale.”
“2024 is projected to be a more challenging year for the industry as overall economic growth slows down and the shift toward low-carbon technologies unfolds more slowly than expected, both of which are putting downward pressure on price levels, especially for battery materials such as nickel and lithium,” it said.
A survey carried out by McKinsey noted that industry participants are unlikely to pay extra for low-carbon materials, adding: “In fact, less than 15 percent of surveyed decision makers indicate they would be willing to pay a premium of around 10 percent if there was a scarcity of green materials by 2030.”
A separate McKinsey report, also published the same day, found that global carbon emissions are likely to remain well above the levels needed to reduce warming to 1.5°C by 2050-even if all countries deliver on existing climate commitments.
It insisted that increased energy demand will mean emissions from fossil fuels would continue to rise over the next decade, with a decline starting only in 2050.
