Transition Metals Become $10 Trillion Opportunity as Demand Rises and Supply Continues to Lag

BloombergNEF’s first Transition Metals Outlook shows the market value for key metals used in transition technologies will probably triple by 2050

New York, January 18, 2023 – Demand for key metals needed for the deployment of energy transition technologies such as solar, wind, batteries and electric vehicles will grow fivefold by 2050, under BloombergNEF’s so-called Net Zero Scenario. Supply, on the other hand, is constrained due to a lack of investment, increasing country risk toward mining, and ever more depleted reserves.

Country risk remains the key barrier to the development of new mining projects. The global economic slowdown and the need for countries to secure supplies of critical metals have led to the resurgence of resource nationalism and higher resource taxes. These interventions slow down investments in new mines. Given the importance of these metals to the energy transition, governments must strike a balance between meeting the immediate needs of their local economies and the long-term ambition of a global net-zero future.

Kwasi Ampofo, head of metals and mining at BNEF and lead author of the report said: “The energy transition has put a spotlight on raw materials. It presents an opportunity and a responsibility as well. Responsible mining must underpin the extraction of the resources needed to meet this demand. Mining is the bedrock of the energy transition, hence, the industry must lead the way, by first decarbonizing its own footprint.”

The energy transition will lead to a decline in the materials used in power generation technologies that use fossil fuels. In 2050, metals demand from fossil-fuel based power plants (coal and gas) accounts for less than 6% of total demand in power generation in BNEF’s Economic Transition Scenario. That is a drop from about 16% in 2022. Meanwhile, metals consumption in renewables and battery storage more than doubles over the same period.

Yuchen Huo, a metals and mining analyst at BNEF said: “Despite the bearish outlook for metals used in fossil-fuel technologies, the energy transition could lead to a super-cycle for the metals and mining industry. This cycle will be driven by massive expansions in clean energy technologies, which would spur demand growth for both critical minerals and traditional metals.”

Figure 1: Market value and share of transition metals demand for 2022 and 2050

Source: BloombergNEF. Note: ETS is economic transition scenario, and NZS is net zero scenario. Energy transition includes power generation, battery storage, power grids and transport sectors. The outer circle for volume represents the share of energy transition in overall demand for each metal. Market value in 2050 is based on the 10-year historical average price of the metals. Nominal dollar value in 2050 is discounted by a 2.75% annual rate. This is in line with the average rates for major economies where demand is concentrated.

The energy transition requires significant investment in raw materials extraction. This coincides with a period of reduced investor confidence in mining. This lack of confidence is a result of various interrelated factors that include recent market volatility and the complexity of developing new mines. One promising route for firms to tackle the barrier of raising capital is by improving their ESG performance. This will enable companies to distinguish themselves in the capital markets.

Ashish Sethia, global head of commodities, energy and environmental markets at BNEF said: “The mining industry has a trifecta of challenges – raising supply, keeping costs low and reducing its environmental and carbon footprint at the same time. It is like solving a Rubik’s cube. Not easy but not impossible to do”.

Kerri Chyka

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About BloombergNEF

BloombergNEF (BNEF) is a strategic research provider covering global commodity markets and the disruptive technologies driving the transition to a low-carbon economy. Our expert coverage assesses pathways for the power, transport, industry, buildings and agriculture sectors to adapt to the energy transition. We help commodity trading, corporate strategy, finance and policy professionals navigate change and generate opportunities.
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