Evaluating future metal demand

September 13th, 2017

Dr Mark CookseyBy Dr Mark Cooksey

Two key takeaways from the World Bank’s report

In June 2017, the World Bank issued a report, which presents a framework for estimating future metal demand.

When using the report for future decision making, there are two key factors you should consider before taking any next steps, which we explore in this blog. These are:

  1. The true value of the cumulative growth in demand for different metals.
  2. The broader system-wide impacts of renewable energy on demand for individual metals.

Future metal demand: The true value of cumulative growth

The World Bank’s report outlines projections for the growth in metal demand required to support the transition to a low carbon future, and which metals will be most affected by this transition. However, these estimates only provide a percentage change in cumulative demand for each metal. The report data doesn’t consider the impact of price and changes in actual volume, to predict the real future value of each metal market. In the absence of this data, it is impossible to evaluate the relative opportunities arising from the changes in demand for different metal markets. Additional information is vital for making informed decisions on future investment and planning. For example, it is not immediately obvious from the World Bank’s report, but most of the financial opportunity from the increased metals demand it flags actually lies in marginal changes to long established metals markets. The small percentage increases indicated for iron, aluminium, and copper, are all a factor of 14 or more times more valuable than the large changes indicated for newer metals such as neodymium and indium (lithium is a major exception here). Silver, one of the oldest and most established metals markets, is interesting in that it is likely to experience large demand growth both in percentage and total value terms.

The report also mentions, but does not attempt to incorporate, the effects of the substitutability between metals, especially of newly important high technology metals such as neodymium, indium, and lithium. This aspect is crucial to understanding the uncertainty around the potential demand growth, and size of these markets.

Future metal demand and the effect of renewable energy growth

The growing emphasis on more sustainable development, and the technologies which enable it, has caused a number of changes in the metals industry. These changes will continue and probably accelerate in the future. In the energy sector, the impact of sustainable development is particularly noticeable where there has been “remarkable growth in renewable energy technologies…accounting for 17% of global energy consumption” (‘The Growing Role of Minerals and Metals for a Low Carbon Future,’ World Bank).

Solar panels refectling blue sky and clouds

The global growth in the market for renewable energy technology sets the context for The World Bank report. In its analysis, however, the report only really considers the direct impacts of growth in renewable energy generation plant on future metals demand. The broader changes to the energy system that integrating this capacity will require, and the great potential impact these changes are likely to have on metals demand, are not dealt with at all. This omission is of great significance, and the resulting information gap is not well filled by other existing research.

The development of infrastructure to support the growth in intermittent renewable energy sources appears likely to drive increased demand for many metals. For example, the construction of transmission grids requires large inputs of copper. According to preliminary work, this copper demand would dwarf the demand effects of the all renewable generation plant, on all other metal markets, regardless of the renewable technologies chosen. Unfortunately, while always huge, current estimates of this additional copper demand vary greatly. For example, two existing studies vary in their estimates for one component of the future transmission system by a factor of over 30 (24 million tonnes versus 900 million tonnes).

The research gaps highlighted by the World Bank’s assessment of future metal demand raise a troubling concern – the degree to which we, as an industry, lack an understanding of how renewable energy developments will affect demand, and how this should shape investment decisions.

How can you bridge the gap?

While the World Bank report presents an important overview of one aspect of the impact of increasing renewable energy generation on future metals demand, the areas it overlooks are likely to be the ones that create more significant long-term flow-on effects for your organisation.

Mining companies need much more robust and comprehensive information than this to the make long-term planning and investment decisions most likely to maximise revenue and shareholder returns. Similarly, government bodies need such information to be able to make informed regulatory decisions. This is especially important for those states and countries, like Australia, where the mining and metals industries are a major part of the economy,

Further research into the areas of concern outlined in this blog is required to bridge this knowledge gap, and thereby ensure that the metals industry can maximise value for all stakeholders.

CSIRO’s expertise across minerals and metals, the economy, and energy, provides you with a framework of established methodologies and processes to effectively undertake this essential research.

For further information about how we can support you in measuring the true future demand of the metals that affect your business, contact the Sustainable Metals team on +61 3 9545 8865 or email me at Mark.Cooksey@csiro.au.

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