Energy transition metals on the verge of uneven and explosive rise
LONDON / HANOI (Reuters) – Supported by strong demand expectations as the world moves away from reliance on fossil fuels, prices for many industrial metals have skyrocketed, but future price hikes will likely be limited to some ingredients of the energy transition.
The narrative of a synchronized recovery, characterized by some as a supercycle, is at odds with expectations that material shortages will occur at different times.
“Energy transition metals are going to take off a lot, but not all at the same time,” said Julian Kettle, analyst at Wood Mackenzie.
The easing of restrictions on coronaviruses and strong demand for manufacturing industrial metals sparked a speculative rally that cooled.
Prices for copper, aluminum and tin are above levels necessary to encourage new capacity.
Rare earths are not yet at incentive levels.
Wood Mackenzie estimates that demand for copper from renewables, energy storage and transmission, and electric vehicles and charging infrastructure will more than double to 8.6 million tonnes in 2025 from levels 2020 in a scenario that limits global warming to less than 2 ° C.
WoodMac predicts that 15.1 million tonnes will be consumed in energy transition applications by 2030.
Review of the world refined copper market since 1995
New supply will be needed, but miners are reluctant to invest after their experience of the past decade when investment collided with peak demand, causing prices and incomes to collapse.
The rising costs associated with environmental, social and governance (ESG) issues add to the challenges minors face.
Aluminum and copper set to sink into supply shortages in coming years as global demand exceeds production
Resource nationalism whereby countries aim to take a larger share of the incomes of miners is also an obstacle.
Tin is the forgotten infantryman of the energy transition, which will be the biggest driver of long-term demand for weld metal, Kettle said.
Almost 50% of tin demand, estimated at around 340,000 tonnes this year, is for electronic components, many of which are vital to the low-carbon economy.
Without tin, electrons do not circulate and batteries in electric vehicles do not charge.
Stocks at SHFE tin warehouses fell 29% this year, while tin prices rose 35% tmsnrt.rs/3zN2OGH
Jeremy Pearce, analyst at the International Tin Association, estimates that electric vehicles, renewables and energy storage use about 45,000 tonnes of tin per year.
“It could reach 70,000 tonnes per year in 2025 and maybe 100,000 tonnes per year in 2030.”
Neodymium and praseodymium (NdPr) magnets are used in wind turbine generators and electric vehicle motors.
Electric vehicles made without rare earths are less efficient because the battery must be around 30% larger to cover the same distance, analysts say.
CRU analyst Daan de Jonge sees the energy transition pushing NdPr demand and prices over the next few years to levels that encourage new projects, but cites caution.
“China holds the intellectual rights for the processing of rare earths. They’ve invested in technology when others wouldn’t, ”said de Jonge.
Global demand for neodymium praseodymium (LoE) from electric vehicle and wind turbine sectors is expected to increase by more than 150% by 2025 to become the main source of use
for rare earth
China’s dominant position in rare earths supply worries other countries
Processing rare earths is complicated because there are a lot of metals in the same ore, unlike copper ore, for example, which may only contain cobalt or molybdenum.
CRU forecasts a NdPr demand for electric vehicles and wind turbines at 41,575 tonnes, or 62% of the total in 2025, against 20,544 tonnes or 42% of the total this year.
Demand for aluminum and copper in the global energy transition
Aluminum weighs about a third of the weight of steel per cubic foot, helping to “lighten” electric vehicles and increase mileage before batteries need recharging.
In Wood Mackenzie’s 2˚C scenario, demand from renewables, energy storage and transmission, electric vehicles and charging infrastructure will reach 24.4 million tonnes in 2025 and 42 million tonnes in 2030 against 13.5 million tonnes this year.
Total global aluminum demand is expected to reach around 76 million tonnes in 2025, up 10% from this year, leaving a supply gap of around two million tonnes.
The projected shortages are in part due to China’s carbon emissions targets. The China Non-Ferrous Metal Industry Association (CNIA) has set an interim target of peaking emissions by 2025.
The main energy transition metals of the main Chinese consumer have jumped
in price in 2021
“Total carbon dioxide emissions from the fusion were 420 million tonnes this year,” said ING analyst Wenyu Yao. “A spike by 2025 suggests China should cap its smelting capacity below 45 million tonnes.”
Reporting by Pratima Desai and Mai Nguyen in Hanoi; edited by Veronica Brown and Barbara Lewis