Today, the global energy system is in the midst of a major transition to clean energy. The efforts of an ever-expanding number of countries and companies to reduce their greenhouse gas emissions to net zero call for the massive deployment of a wide range of clean energy technologies, many of which in turn rely on critical minerals such as copper, lithium, nickel, cobalt and rare earth elements. This World Energy Outlook special report on The Role of Critical Minerals in Clean Energy Transitions identifies risks to key minerals and metals that – left unaddressed – could make global progress towards a clean energy future slower or more costly, and therefore hamper international efforts to tackle climate change.
This paper, The Role of Critical Minerals in Clean Energy Transitions, by the IEA is a detailed look at the critical minerals and metals required for the perceived (forecast) growth in demand. It includes a host of references in its appendix as well.
It is very worth reading.
However it is Matau Advisory’s view that the report pays little attention to, and simply assumes the ability or capacity of the resources industry to supply the required raw materials (minerals & metals) at the proposed growth rates. On average it takes 6-10 years from discovery drill hole through evaluation, feasibility studies, permitting, environmental & heritage studies (often conducted in parallel), Financial Investment Decision, construction & development, commissioning, to production at name-plate rates. Many of the key commodities are currently in short supply (at current prices) even at the relatively low demand growth rates of the current time.
The supply of the key minerals and metals (Cu, Ni, Li, Mn, Co, graphite, Cr, Mo, Zn, REE, Si, and some others) will be critical to achieve those growth rates.
USA – Housing Starts, Industrial Production, Electricity End-Use, Bond Yields
- USA is slowing! Data this week reinforces last week’s OECD CLI implications.
- Base metal inventories continue to remain tight. Most prices are in the ‘nose of pinch-point graphs. Pinchpoint positions are mostly less than 1 week’s consumption. However sentiment (geopolitical) continues to drive prices over fundamentals.
- Several metals (Ni & Co this week) are showing signs that reduced supply is likely to lead to higher prices.
- Outlook is for ‘not enough’ new mine supply in coming years (the next decade), for several key commodities.
The theme of the Resources Rising Stars conference at the Gold Coast earlier this year is appropriate: “Pick the stock, not the market”.
*Copper Codelco optimistic about long term price for Cu. Short term prices pressured by growth concerns.
*Cobalt Co price is up on news that Glencore is shutting its large DRC mine.
*Nickel Philippines’ largest exporter of ‘high’ grade Ni laterite ore is to shut upon depletion of its Reserves.
*Zinc & Lead ORN calling for ongoing need for more Zn & Cu production. Nyrstar Pb smelter stopped again.
*Tin Trump acknowledges that tariffs increase domestic prices. Delays new tariffs till after Christmas.
Aluminium Beijing announced additional import scrap quotas.
*Gold Gold price gains as faith in Central Banks is about to be tested again.
Platinum & Palladium Progress … of sorts … being made in wage negotiations with AMCU..
*Oil .Russia & China have stuck by Venezuela, though that may change.
Coal A weaker CNY, a safety campaign, shipment restrictions, though premium HCC is preferred.
Iron Ore Beijing’s stimulus restraint driven by low infrastructure spend, impacting prices.
Shipping Baltic indices, Cape, Panamax & Handymax up this week.
Port Hedland – Iron Ore shipments: Shipments down in July after a bumper June effort.
USA – Electricity End-Use: Total demand slowing, mostly in residential demand.
USA – Bond Yields: A historical review + Current 10yr-2yr curves ‘almost’ inverted. 10yr-3mo is!
USA – Industrial Production – Capacity Utilisation: Really slow IP growth. Cap Util is sub optimal.
USA – Housing Starts: House starts almost stalled.
Comments of particular interest are noted with ‘*’.
- Base metal inventories continue to remain tight. Most prices are in the ‘nose of pinch-point graphs. Pinchpoint positions are mostly less than 1 week’s consumption. More media commentary is recognising this condition. However sentiment (geopolitical) continues to drive prices over fundamentals.
- Base metal (industrial metal) trade volumes though exchanges have slowed markedly during 2019, with ‘trade-war fatigue’ and the lack of apparent progress emanating from the USA-China trade talks, which is affecting the confidence to make decisions and trade in markets.
- USA economic data (industrial production, orders to durable goods, housing starts, construction spending) that relate directly to commodities demand, are all showing signs of slowing or negative growth. employment is usually a lagging data series, orders to durable goods and new housing starts are both indicators of confidence that normally lead employment data changes. The USA Federal Reserve Chairman commented that there is a concern that slowing global economies may impact upon the USA. Matau’s observations are that the USA economy is already slowing.
*Copper Term concentrate TC/Rs between Chinese and Chileans. DRC’s Cu output down. AIS doing well.
*Cobalt Artisanal Co miners in DRC are the global swing producer.
*Nickel Indonesia may reinstate Ni-ore export ban in 2022. WSA, PAN.
Zinc & Lead Nyrstar extends force majeure. NCZ production ramping up. Plans to double capacity..
*Tin *Tin market under greater pressure from economic slowdown & falling demand than supply issues.
Aluminium Trade conflict with China which investors expect to weaken economic growth and metals demand.
*Gold Gold and financial markets may be a little ahead of themselves. No details on talks still.
Platinum & Palladium Wage negotiations: talks begin.
*Oil Market tightening, though not clear how long will last.
Coal Chinese mills restocking met coal, ahead of possible import controls.
Iron Ore China’s iron ore imports fell in June. Heading into the maintenance and antipollution half year.
Shipping Capes boosted by iron ore.
*LNG markets: demand will start to outstrip supply by 2022-2023
UK – Industrial production, manufacturing et al: positive growth in most segments.
USA – Construction spending: remains negative growth, particularly in private & residential segments.
Germany – IP, durable goods, & construction: IP & Durables -ve. Construction +ve.
An article from Petroleum Economist (italics are Matau Advisory’s emphasis) is below.
Note that the article’s assumptions are that by 2050, 100% of cars in UK will be electric. My limited imagination suggests that is a big ask. Thus the required increase in demand for critical commodities will appear dramatic.
Note also that BHP and BP assume that EVs may achieve 40% of market share by 2040.
Matau’s thinking is that with the time constraints on discovery, evaluation, permitting, construction and commissioning of new projects being approximately 6-10 years (with the average skewed to the longer term), that supply of the critical commodities, (lithium, cobalt, graphite, nickel, copper, manganese) to battery factories at the very high forecast growth rates (+20% p.a. for ~ 10 years from 2020) will seriously constrain growth rates, to likely less than 10% p.a., based on current new mine production growth rates, and even that supply growth rate will be a challenge. i.e. that the EV uptake will be limited by supply of critical materials.
It is not so much the political stability of the jurisdiction, rather the process from discovery to delivery (anywhere in the world).
That commodity supply thematic also applies if enthusiasts want to displace Li-ion batteries with a different battery construction that may include say vanadium, zinc-air, et al.
There may be scope for new technology to improve recoveries of some of the key elements from existing operations, though these technologies have yet to be identified and or applied.
This article refers to the logistics for delivery of power supply for EV’s to the UK. Many other countries have lower population densities, spread over larger areas, which suggests to Matau that the greatest uptakes are likely to be within major cities. Also many large cities have created their own (polluted / photo-chemical smog) microclimates that a high level of EV uptake could alleviate, including examples such as Los Angeles.
Matau applauds the development and adoption of EV’s though considers that careful thought and management of expectations is required.
EV revolution could stall due to mineral shortages
More planning is required to ensure adequate supply, researchers say
A potential shortage of minerals needed to produce the billions of batteries required to power electric vehicles (EVs) risks slowing down the transition from internal combustion engines (ICEs) to cleaner forms of transport, according to a team of UK-based scientists.
Researchers working on the Security of Supply of Mineral Resources (SOS Minerals) multi-institution research programme, partly funded by the UK government, have crunched the numbers and come up with some daunting-looking headline figures.
They looked at the amount of minerals required to make all cars and vans in the UK electric by 2050—based on the current UK fleet size of some 31.5mn vehicles—and for all new sales to be purely battery electric by 2035. Both are recommendations contained in a report by the parliamentary Committee on Climate Change (CCC). In early June, these were being considered for adoption by the UK government, whose current pledge is limited to eliminating ICE sales by 2040.
The team concluded that just to meet these UK targets, assuming the vehicles use next-generation NMC 811 batteries, would require just under two times the world’s total annual cobalt production, nearly all world production of neodymium, three quarters of the world’s lithium production and at least half of the world’s copper production, based on 2018 data.
Just ensuring that EVs meet UK demand for new cars and vans from 2035, would require the UK to import the equivalent of European industry’s entire cobalt consumption, according to a letter sent to the CCC in early June. It was signed by Richard Herrington, head of the Earth Sciences department at London’s Natural History Museum, and other scientists involved in the SOS Minerals programme.
Scaling that up to a global level would, of course, be an even a greater challenge. By 2050, some forecasts predict, there will be at least 2bn cars on the world’s roads. Herrington estimates that if all of those were to be EVs, annual production of neodymium and dysprosium would need to increase by 70% and stay at that level until 2050. On the same basis, annual copper output would need to more than double and cobalt output would need to increase by at least 3.5 times to meet global demand.
Herrington told Petroleum Economist that increasing minerals production to meet the envisaged increase in the EV fleet—as well as for the additional renewable energy and storage infrastructure required to power the fleet and extract the minerals—would be challenging but not impossible.
“[The ambition] is laudable, and it could be plausible. but it needs greater thought as to where those materials might come from,” he said.
Many of the rare earths and other minerals used for batteries are mined in politically unstable parts of the world, such as parts of sub-Saharan Africa. Herrington believes they could be sourced closer to the main EV markets, providing greater security of supply, as well as boosting overall production. That includes Europe, where, for example, more cobalt could be recovered from copper mines than is currently the case, if new technologies were deployed, he said.
The increase in renewable energy infrastructure needed to provide power for EVs would also consume more metals and minerals. Wind turbines require a lot of steel, while solar panel installations consume several scarce minerals, such as high purity silicon, indium, tellurium and gallium. Extracting the minerals themselves is also a power-hungry process, adding to demand.
Then there are the transmission lines needed to connect them to the grid. Herrington notes that a power station requires fewer copper-based cables than hooking up the hundreds of wind turbines required to produce the same amount of power.
“You could be more aggressive with carbon capture and still continue with hydrocarbons to generate power,” he said.
However, given the faltering progress of efforts to get carbon capture and storage moving in the UK and elsewhere in the world, for now, this technology seems unlikely to be able to play more than a bit part in efforts to allow coal and gas to play a long-term role in the energy sector.
Herrington does not believe the potential minerals supply crunch necessarily means the world will have to use more oil for longer in the transport sector.
“I don’t think we have to. We just have to make sure that we gear up, so that the alternatives are available in the quantities that we want,” he said.
USA – OECD CLI, EVs
Comments of particular interest are noted with ‘*’.
- OECD Composite Leading Indicators (CLIs) continue to show a generally sluggish ‘developed economy’ world, and growing ‘emerging’ economies.
- Base metal inventories remain tight, though some prices are just starting to reflect fundamental positions. Uncertainties generated by geopolitical activities continue to hinder normal trading conditions, though a sense of some certainty or time-frames to outcomes, appears to be calming some of the market nerves.
- USA data is showing several aspects of slowing growth. (Industrial Production, Housing Starts)
- Matau notes that in January 2006, the New Housing Starts and Residential Construction Spend data both commenced prolonged downturns culminating in the global financial crisis. Both these sets of data are worth pondering and are graphed in this issue. I am not suggesting we are up for a repeat, rather I am amazed that such turning points seemed to attract so little attention over the following two years.
*Copper Chile’s Cochilco forecasts Cu prices of USD 3.05/lb for 2019, and USD 3.08/lb for 2020. .
*Cobalt Basic economics of supply & demand have not changed.
Nickel Price supported by hopes that China’s stimulus is translating into stronger growth.
*Zinc & Lead Analysts expect increased Zn mine supply (Zn concentrates) in 2019. Digital Pb battery map.
Tin LME needs to review & revise its rules for metals’ warehousing.
Aluminium China’s Al production reduced in March, potentially related to capacity cuts.
Gold Venezuela sold USD400m of its gold holdings.
Platinum & Palladium Zimbabwe to name two new investors in separate new Pt mine ventures.
*Oil Drilling in USA shale districts slowing down. USA to review its Iran sanctions in May
Coal LVPCI price contracts for the Mar19Qtr finally settled by majors.
Iron Ore Prices down as Brazil’s Bucutu set to reopen. Aust. exports post cyclones expected to increase.
Shipping Freight rates rose across major Asian routes this week.
*Electric vehicles: Can global mine-supply meet the manufacturers’ high growth forecasts?
**OECD Composite Leading Indicators: .
*USA – Construction Spend: Private & Residential spend was down. Public and NonRes was up. Note the downturns in Residential in Jan 2006.
USA- Durable Goods, Vehicles, & Electronics: Durables OK, Vehicles strong, Electrics OK.
USA Industrial Production & Capacity Utilisation: USA appears to be slowing down.
*USA – New Housing Starts: Total House Starts down. Note also the downturns in Housig Starts in Jan 2006.