Energy transition to drive demand for key metals well above current supply capacities: IMF

The projected increase in metals consumption through 2050 under a global net-zero emissions scenario suggests large deficits between supply and demand based on current production rates of various key metals, the International Monetary Fund said Dec. 8 in blog post.

Current graphite, cobalt, vanadium and nickel production appear inadequate for the energy transition, showing a more than two-thirds gap versus demand, while copper, lithium and platinum supplies also are inadequate to satisfy future needs, with a 30% to 40% gap versus demand, the Fund said.

For some minerals, existing reserves would allow greater production through more investment in extraction, such as for graphite and vanadium.

For other minerals, current reserves could be a constraint on future demand — especially lithium and lead, but also for zinc, silver, and silicon, it said.

Importantly, however, metal reserves and production are not static. Firms can expand reserves through innovation in extraction technology and further exploration efforts may lead to increasing the future supply of metals to meet future demands, the IMF said.

Recycling

Moreover, metals recycling can also increase supply. Reuse of scrap metals only occurs on a large scale for copper and nickel, but it's now increasing for some scarcer materials like lithium and cobalt, the Fund said.

A related challenge is insufficient financing for metals and mining investment due to growing investor focus on environmental, social, and governance considerations, or ESG, it said.

Reduced access to financing by firms with lower ratings could constrain production, adding another potential supply-chain bottleneck. In response, miners are trying to reduce their carbon footprint, the IMF said.

An S&P Global analysis shows that the ESG average score of the S&P Global 1200, an index representing about 70% of global stock-market capitalization, stood at 62 out of 100, while the metals and mining sector's score rose to 52 last year from 39 in 2018, the Fund said.

This may indicate miners are catching up with other sectors to become more attractive to global investors seeking to build more responsible portfolios, it said.