The Great Metal Crunch: Exploring the Consequences of Demand Exceeding Supply – Part 2/4
What will happen when the demand for raw materials needed for the green energy transition exceeds supply?
Scarcity will once again prove to be the mother of innovation (even in mining): Demand is a driver for innovation. Whether it’s a race to the bottom of the ocean or to space, the scarcity of metals will drive exploration efforts to discover new deposits and develop innovative mining techniques. Mining companies will invest heavily in research and development to extract metals via unconventional means, such as deep-sea mining, space mining, and robotics. Such mining techniques, often referred to as novel mining methods, are now increasingly being studied. Beyond the challenges of the technology of mining in space or the deep sea, international codes and policies that will guide these types of mining to ensure they are environmentally safe are still being debated.
The scarcity of metals will drive significant advancements in technology, such as material substitution, product redesign, and the development of alternative materials. Industries will seek to reduce their reliance on rare or expensive metals by finding suitable alternatives or optimizing resource usage. McKinsey & Company, in a 2022 report, explained that lithium mine supply will need to grow by around a factor of seven versus today’s required growth. Meanwhile, metals with smaller mine supply (such as tellurium) will need to show even faster growth—as such, these are the main candidates for required substitution and technological innovation. Furthermore, copper and nickel demand exceeds supply by five to eight million and 700,000 to one million metric tons, respectively. For copper and nickel alone, Mckinsey & Company estimates that meeting demand growth of the order of magnitude shown in the figure below will require $250 billion to $350 billion in cumulative capital expenditures by 2030, both to grow and replace depletion of existing capacity.
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