Investment in new metal supply totalling $200 billion
is essential to meet demand
LONDON 17th October 2023 – The current metals
super-cycle that is a major component of the global energy transition could
stall due to a gloomy global macroeconomic environment, geopolitics and a lack
of investment in new production facilities according to analysts from Wood
Mackenzie.
Speaking at a press briefing in
London, Nick Pickens, Research Director of Global Mining at
Wood Mackenzie told reporters that US$ 200 billion (bn) of new mining projects
were required by 2030, as well as more efficient and creative methods of
recycling existing scrap metals.
“A 7-10-year lead time for new mining projects makes meeting
supply/demand requirements difficult.” Pickens said. “Combined with mid-term
uncertainties for demand and metal prices, the situation does create some
serious headwinds for the metals super-cycle.”
Complex Copper
Pickens added that copper markets would continue to be volatile as
end-users clamoured for the metal to support increased electrification.
“Products such as copper wire rod and electrodeposited
foil are used extensively in the manufacture of electric vehicles [EVs] and
renewable energy equipment,” Pickens said. “This means investment in support
infrastructure to underpin copper end-use demand is essential moving forward.”
Copper: End-use demand from green sectors (Mt)
Source: Wood Mackenzie
Pickens added that new projects were required to meet
long-term demand, but scrap will also play a pivotal role for a long-term
solution.
“Governments need to support the increased use of
scrap copper.” Pickens said. “It offers lower carbon intensity than new copper,
making it a more attractive solution for end-users looking to lower emissions.”
Supply may not meet demand for battery raw materials
The booming demand for battery raw materials has seen markets become
increasingly volatile Sue Shaw, Head of Energy Transition & Battery Raw
Materials told reporters at the event. She added that meeting future demand is
challenging due to heightened supply risks. And while government incentives
will be essential to diversify supply chains, they can also restrict raw
material availability.
“Prices for battery raw materials will remain volatile, but future
cycles are becoming more sustained as markets are showing signs of maturing,”
Shaw said. “The pressure to deliver is huge even with recycling.”
Supply of lithium, graphite, nickel and cobalt depends
on only a handful of countries and regions
Source: Wood Mackenzie
Bleak demand for aluminium
Ami Shivkar, Aluminium Analyst at Wood Mackenzie told reporters that a
downturn in aluminium demand in Europe was expected due to the region
struggling with inflation, higher interest rates and a sharp slowdown in the
manufacturing and construction segments.
Citing Wood Mackenzie forecasts, Shivkar said that a cumulative global
surplus of 1.1 million tonnes is expected between 2023-2025.
“Prospects for 2024 will hinge on better economic performance in the
major markets and a return to restocking across the aluminium supply chain,”
Shivkar said. “The silver lining is that exchange inventories continue to
fall and, all things being equal, should be supportive for prices.”
Nickel prices expected to
fall
Sean Mulshaw, Director of Nickel Markets at Wood Mackenzie told
reporters that the current nickel market was oversupplied and this would have a
negative impact on prices. With a surplus of 1 million tonnes expected by 2025
he expects prices will fall accordingly.
“Despite the big surplus prices have resisted dropping below US$20,000 a
tonne until recently,” Mulshaw said. “This surplus looks set to last for the
rest of the decade so producers will need to be ready for this.”
Corporates braced for earnings decline
Bulk commodity price weakness will contribute to a fall in mining
companies’ profits in 2024 according to Wood Mackenzie forecasts. James
Whiteside, Head of Corporate Metals & Mining told reporters that new
investment will suffer as companies prioritise debt reduction.
“A preponderant concentration on meeting shareholder
pay-out expectations takes precedence, while endeavours associated with growth
and decarbonisation take a backseat,” Whiteside said. “Most companies are
committing less the 10% of capex to decarbonisation and renewables, and even
less on exploration and evaluation.”
He added that a modest silver lining amidst this scenario is the notable
headway observed in the transition towards renewable power generation by mining
companies, achieved through investment in self-generation or Power Purchase
Agreements (PPAs).