Released May 17, 2024 | SUGAR LAND
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Global production of minerals critical to the energy transition, including copper, lithium, nickel, cobalt, graphite and rare earth elements, has risen faster than demand, leading to lower prices for most of those minerals, said a new report from the International Energy Agency (IEA) (Paris, France).
But in the report, Global Critical Minerals Outlook 2024, released Friday, the agency raised questions about whether the Metals & Minerals Industry can continue increasing production to meet what is expected to be soaring demand for those minerals in the coming years. The reason for doubt? Falling commodity prices have taken a heavy toll on the financial health of the global mining industry, raising questions about its ability to make subsequent investments.
Global demand has risen for minerals tied to the energy transition, but production of those minerals has risen faster, leading to sharp price declines for most of those minerals, the IEA said. Also driving the price decline was a reduction to earlier projections of global demand growth.
Worldwide demand for lithium grew about 28% per year over the 2021-2023 period, but annual average production growth outpaced that, leading to a 75% reduction in its price, the report found. Nickel, cobalt, graphite and rare earth elements all saw annual average production gains of 8% to 15% over 2021-2023. As production growth outstripped demand growth, prices fell: graphite, nickel and cobalt prices each fell nearly 50% from 2022. Copper was the only exception to the declining price trend; it was flat with 2022 prices, the IEA said.
Click on the images at right to see global supply and demand growth rates between 2021 and 2023 for critical minerals, and a chart of 2023 price trends for critical minerals.
Falling commodity prices, while good news for consumers, "presents challenges" for companies that mine and process those commodities, the IEA report said. "Industry revenues declined by 10% in 2023 while operating profits plummeted by 34%. Free cash flow also decreased by over 40%, constraining the industry's ability to allocate significant capital for future growth."
Click on the image at right to see a snapshot of the financial performance of critical minerals companies.
The report continued: "These challenges have been exacerbated by increases in production costs in recent years. Since 2020, production cash costs for copper, nickel, and cobalt all have trended upwards, with marginal declines in 2023. Between 2020 and 2023, production costs increased by 6% per year for copper, 11% per year for nickel and 13% annually for cobalt. Royalties were the largest contributor for copper and nickel, and costs related to energy and reagents were the main driver across the materials."
As a result of rising costs and falling revenues, mining and refining companies issued a "flurry of announcements to put capacity into maintenance and suspend operations (suspension does not mean a permanent closure). While many high-cost producers and new entrants are feeling the impact of the price crash, numerous established assets are still profitable in the current price environment."
The volatile supply-demand fundamentals could lead to further geographical concentration of production, as today's dominant suppliers typically operate at the lower end of the cost curve, observed Global Critical Minerals Outlook 2024.
The IEA report assessed potential future demand for critical minerals under its three established climate change scenarios: The scenarios are:
Copper's "unmatched" combination of characteristics--electronic conductivity, longevity, ductility and corrosion resistance--puts it at the center of the transition to cleaner forms of energy, the IEA said. "Therefore, the security of supply of copper is paramount for the energy transition."
Global annual demand for copper is expected to rise from approximately 26 million tonnes in 2023 to about 31 million tonnes in 2030 in the APS and STEPS cases. In the more aggressive NZE scenario, demand rises to an estimated 33 million tonnes in 2030. Thereafter, in the NZE case, demand for copper increases a further 20% through 2050, reaching around 40 million tonnes that year. "This surge in demand is primarily due to the rapid deployment of renewables and EVs, and a significant expansion of electricity networks," the IEA remarked.
Click on the image at right to see a graphic of copper demand and outlook under the IEA's three climate change scenarios.
The IEA report then plotted expected supply for all critical minerals from existing and announced projects in 2035 under "base" and "aggressive" assumptions and compared that to the necessary supply under the APS and NZE cases. By 2035, the expected supply for nickel, cobalt, graphite and rare earth minerals was seen as roughly equaling the implied demand that would be needed to meet global climate goals.
However, the agency projected that production of copper and lithium in 2035 was projected to fall short of the implied demand for both in the APS and NZE cases.
Click on the image at right to see the IEA's projection of production of six critical minerals in 2035 under the implied demand contained in the APS and NZE cases.
"The Metals & Minerals industry has experiences upturns and downswings in recent years," commented Loretta Clark, Industrial Info's North American research manager for Metals & Minerals. "Higher commodity prices and strong demand growth led to increased investment, which has yielded increased output for these critical minerals. It's been a virtuous cycle."
"But it is unclear if this will continue," she added. "Prior years' investments were made when interest levels were much lower than they are today. And production costs are rising."
"As we look to the future," she continued, "we see demand for critical minerals rising. When minerals recycling is included, it looks like the global resource base can mostly meet future demand, though copper and lithium remain questions. But political and other uncertainties cloud the horizon. And interests need to come down in order to make future investments viable."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
But in the report, Global Critical Minerals Outlook 2024, released Friday, the agency raised questions about whether the Metals & Minerals Industry can continue increasing production to meet what is expected to be soaring demand for those minerals in the coming years. The reason for doubt? Falling commodity prices have taken a heavy toll on the financial health of the global mining industry, raising questions about its ability to make subsequent investments.
Global demand has risen for minerals tied to the energy transition, but production of those minerals has risen faster, leading to sharp price declines for most of those minerals, the IEA said. Also driving the price decline was a reduction to earlier projections of global demand growth.
Worldwide demand for lithium grew about 28% per year over the 2021-2023 period, but annual average production growth outpaced that, leading to a 75% reduction in its price, the report found. Nickel, cobalt, graphite and rare earth elements all saw annual average production gains of 8% to 15% over 2021-2023. As production growth outstripped demand growth, prices fell: graphite, nickel and cobalt prices each fell nearly 50% from 2022. Copper was the only exception to the declining price trend; it was flat with 2022 prices, the IEA said.
Falling commodity prices, while good news for consumers, "presents challenges" for companies that mine and process those commodities, the IEA report said. "Industry revenues declined by 10% in 2023 while operating profits plummeted by 34%. Free cash flow also decreased by over 40%, constraining the industry's ability to allocate significant capital for future growth."
The report continued: "These challenges have been exacerbated by increases in production costs in recent years. Since 2020, production cash costs for copper, nickel, and cobalt all have trended upwards, with marginal declines in 2023. Between 2020 and 2023, production costs increased by 6% per year for copper, 11% per year for nickel and 13% annually for cobalt. Royalties were the largest contributor for copper and nickel, and costs related to energy and reagents were the main driver across the materials."
As a result of rising costs and falling revenues, mining and refining companies issued a "flurry of announcements to put capacity into maintenance and suspend operations (suspension does not mean a permanent closure). While many high-cost producers and new entrants are feeling the impact of the price crash, numerous established assets are still profitable in the current price environment."
The volatile supply-demand fundamentals could lead to further geographical concentration of production, as today's dominant suppliers typically operate at the lower end of the cost curve, observed Global Critical Minerals Outlook 2024.
The IEA report assessed potential future demand for critical minerals under its three established climate change scenarios: The scenarios are:
- Stated Policies Scenario (STEPS), which reflects existing policies and measures, as well as firm policy ambitions and objectives that have been legislated by governments around the world
- Announced Pledges Scenario (APS), which assumes that all announced ambitions and targets made by governments around the world are met in full and on time. With regards to electromobility, it includes all recent major announcements of electrification targets and longer-term net zero emissions and other pledges, regardless of whether these have been anchored in legislation, and
- Net-Zero Emissions by 2050 Scenario (NZE), which sets out a "narrow but achievable pathway" for the global energy sector to achieve net zero CO2 emissions by 2050.
Copper's "unmatched" combination of characteristics--electronic conductivity, longevity, ductility and corrosion resistance--puts it at the center of the transition to cleaner forms of energy, the IEA said. "Therefore, the security of supply of copper is paramount for the energy transition."
Global annual demand for copper is expected to rise from approximately 26 million tonnes in 2023 to about 31 million tonnes in 2030 in the APS and STEPS cases. In the more aggressive NZE scenario, demand rises to an estimated 33 million tonnes in 2030. Thereafter, in the NZE case, demand for copper increases a further 20% through 2050, reaching around 40 million tonnes that year. "This surge in demand is primarily due to the rapid deployment of renewables and EVs, and a significant expansion of electricity networks," the IEA remarked.
The IEA report then plotted expected supply for all critical minerals from existing and announced projects in 2035 under "base" and "aggressive" assumptions and compared that to the necessary supply under the APS and NZE cases. By 2035, the expected supply for nickel, cobalt, graphite and rare earth minerals was seen as roughly equaling the implied demand that would be needed to meet global climate goals.
However, the agency projected that production of copper and lithium in 2035 was projected to fall short of the implied demand for both in the APS and NZE cases.
"The Metals & Minerals industry has experiences upturns and downswings in recent years," commented Loretta Clark, Industrial Info's North American research manager for Metals & Minerals. "Higher commodity prices and strong demand growth led to increased investment, which has yielded increased output for these critical minerals. It's been a virtuous cycle."
"But it is unclear if this will continue," she added. "Prior years' investments were made when interest levels were much lower than they are today. And production costs are rising."
"As we look to the future," she continued, "we see demand for critical minerals rising. When minerals recycling is included, it looks like the global resource base can mostly meet future demand, though copper and lithium remain questions. But political and other uncertainties cloud the horizon. And interests need to come down in order to make future investments viable."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) platform helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
