Ramping up responsible mining vital to transcend green transition chokepoints

Ramping up responsible mining vital to transcend green transition chokepoints

30 May    Business, Finance News

As governments around the world urgently seek to accelerate the green transition, the building blocks of a low-carbon economy face a concerning barrier.

In a new study published in May, the International Energy Forum (IEF) warns of major chokepoints in global copper supply chains, with soaring demand driven by clean energy technologies rapidly outstripping production capacities. Given copper’s pivotal role in renewable energy infrastructure and technologies, looming shortages could severely hinder the world’s ability to meet critical climate targets.

According to BloombergNEF calculations, an additional 12.8 million tons of copper are needed by 2030 to keep the Net Zero agenda on track – a stark contrast to the 27 million tons produced last year. Meanwhile, achieving net-zero emissions by 2050 demands a staggering 460% increase in copper production, necessitating the opening of 194 new large-scale mines; yet, the IEF report flags current trends suggesting only 35 will materialise. In this context, the world’s leading mining companies must accelerate socially and environmentally-responsible mining operations to turn the tide before climate change reaches a catastrophic threshold.

Minerals roadblocks threatening green transition

Roughly coinciding with the IEF’s copper demand analysis, the International Energy Agency’s (IEA) ‘Global Critical Minerals Outlook 2024,’ notably confirms significant shortages of minerals essential in the production of electric vehicles (EVs), solar panels, wind turbines and other clean technologies at the heart of the green transition. As IEA executive director Fatih Birol has rightly reminded, the “world’s appetite” for green products “is growing fast – but we cannot satisfy it without reliable and expanding supplies of critical minerals” such as copper, nickel and cobalt.

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While investment in critical minerals mining rose by 10% last year, the pace was slower than in 2022, with the IEA projecting that a mere 70% and 50% of global copper and lithium demand, respectively, will be met by 2035. What’s more, the IEA predicts that limiting a global temperature rise to 1.5 degrees Celsius above pre-industrial levels will require an $800 billion investment in mining projects by 2040.

Among the mineral production pain points is the fact that clean energy technologies require significantly more copper than their fossil fuel counterparts. For example, EVs use three to five times the amount of copper as combustion engine vehicles, in addition to the copper needed to upgrade electric grids. Concerningly, expert warnings on the mounting copper bottleneck have been largely brushed aside, with weak exploration and regulatory inertia exacerbating the widening supply-demand gap.

Unpacking mineral price fluctuations

While production hindrances and rising demand have sent copper prices into the stratosphere in recent months, other critical minerals needed for the green transition, such as cobalt and lithium, have experienced considerable price drops over the past year according to the IEA.

In lithium’s case, slowing growth in the EV market is the primary factor pushing prices down. Lithium producers – particularly in Australia, which accounts for 40% of global supplies – have notably responded to this shock by cutting costs and scaling back operations by 10% of global demand in the first quarter of 2024 alone in a bid to boost prices. However, cobalt miners have not had the opportunity to follow suit due simply to the way in which it is extracted in virtually every country in the world.

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As Goldman Sachs rightly noted earlier this year, cobalt is largely a byproduct of copper and nickel – 98% to be precise, according to the Cobalt Institute – meaning that high copper and nickel production will inevitably keep cobalt supplies high for the foreseeable future.

DRC and Indonesia on the frontlines

In the Democratic Republic of the Congo (DRC) – responsible for 73% of global cobalt production – the mineral is overwhelmingly extracted from ores containing copper-cobalt oxides or sulphides.

In the DRC, Chinese copper-cobalt mining giant CMOC has been driving up local copper production to help meet global demand, with its output for 2024 expected to hit up to 570,000 tons from roughly 420,000 tons last year, largely thanks to its recently-operational KFM mine and additional production at its TFM mine. CMOC’s rising copper production has notably led to increased cobalt output, largely contributing to company becoming the world’s leading cobalt miner.

Meanwhile, rising nickel production in Indonesia, home to the world’s largest reserves and responsible for 40% of supply last year, is further driving up global cobalt supplies – 40% of which could be derived from nickel by 2030. With nickel demand soaring, Indonesia has increased output by a factor of ten over the past decade, with miner PT Vale Indonesia, owner of Sorowako Mine – the country’s third-largest nickel mine – among the firms doubling down on production.

Already churning out nearly 65,000 tons of nickel at Sorowako last year, Vale recently announced plans to build an additional, $2 billion HPAL plant – where nickel and cobalt are separated from ore – to complement its two other HPAL plants currently under construction in Sorowalo and Pomalaa. As with CMOC’s copper production, Vale’s nickel ambitions will continue fuelling cobalt’s upward trajectory.

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Looking ahead

Nevertheless, as Financial Times Editor Roula Khalaf has posited, strong cobalt production will not keep prices low indefinitely, with rising copper prices and cobalt supplies set to drive longer-term demand for cobalt, whose previous scarcity was largely responsible for the temporary market shift away from cobalt-based EV batteries. What’s more, Khalaf has rightly pointed out nickel-manganese-cobalt batteries’ high energy storage capacities relative to other battery technologies, making them particularly well-suited for “the longer-range, heavier vehicles favoured in the West” and setting up cobalt for a demand and price rebound further down the road.

With climate impacts rising worldwide and countries scrambling to get the green transition off the ground, the responsible mining of critical minerals must be vastly accelerated to meet rising demand while decoupling growth in production from growth in environmental impact. In light of recent warnings from the IEF and IEA, temporary market fluctuations must not lead to a short-sighted rollback. In the absence of long-term, expanded production of copper, nickel, cobalt and other vital green transition minerals, global climate goals risk being pushed out of reach with disastrous consequences for the planet.

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