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‘Green’ tech will power industrial commodity prices

Thursday, May 20, 2021

Demand will surge for the minerals for low-carbon technologies, but supply is concentrated and will lag, raising prices

Demand will surge for the many minerals critical to new technologies

Source: IEA Report on the role of critical materials in the energy transition, May 2021, Thomson Reuters Datastream, Oxford Analytica

Outlook

Commodity prices are surging, reflecting not only the recovery from 2020’s slump but also rising demand from construction, zero-carbon transport and renewable energy technologies.

Copper demand will surge, reflecting its importance to electricity networks, electric vehicles and wind and solar power. Investment in new supply will lag. Moreover, supply is concentrated, leaving it vulnerable to disruption. Aluminium could substitute for copper in some usage cases.

Similar medium-term supply strains apply to other minerals crucial to electric vehicles and batteries -- nickel, lithium, cobalt and rare earths. This demand/supply imbalance could see the prices of some industrial commodities rise above trend for a decade.

Impacts

  • Wood Mackenzie sees USD1.7tn of mining investment as needed by 2035 to meet decarbonisation targets, far above spending of the last decade.
  • Uncertainty over the metals mix that evolving EV and power storage technologies will need, and China’s GDP growth easing faster, pose risks.
  • Output of many metals key to green tech is clustered in one or a few countries, potentially posing increased supply chain risks.
  • Spare capacity, rising US output and OPEC+’s wish not to lose much market share will cap oil prices; gas prices also have limited upside.

See also