The Great Metal Crunch: Exploring the Consequences of Demand Exceeding Supply

What will happen when the demand for raw materials needed for the green energy transition exceeds supply?

Cold war over critical minerals: 

The scarcity of metals will necessitate greater international cooperation and the establishment of regulations to ensure fair distribution and responsible mining practices. Governments and international organizations will likely collaborate to address supply chain challenges, but all the trends show another trajectory.

The United States and Canada's heavy reliance on China for crucial materials and minerals in their supply chains has raised significant national security concerns. More than half of the United States' supply of 25 mineral commodities is sourced from China, leaving the U.S. economy and industries susceptible to disruptions in the supply chain originating from China. Recent bans imposed by China on the export of critical minerals signal an unavoidable decline of globalization. Despite efforts by many companies to reduce their dependence on Chinese imports, even a minor shift in metal demands from China or India has the potential to significantly impact commodity prices.

Given the gargantuan efforts necessary in permitting, financing, and community collaboration to start a mine (or, God forbid, a refinery) in North America, the race to net-zero will force us to rely more on imports. In such a scenario, there is not much chance to compete with global heavyweights such as China in critical minerals, is there?

Rising Prices will force a reality check on our ambitions: 

As demand outstrips supply, the scarcity of metals will lead to a significant increase in prices. Rising metal prices will balance the market or trigger a push for alternative technologies. Higher prices, however, can have far-reaching implications for industries that rely heavily on metals, such as automotive, electronics, and renewable energy sectors. This, in turn, can result in increased costs for consumers and potential supply chain disruptions. So the question presents itself: are consumers ready to pay for the transition to net-zero?

Scarcity will once again prove to be the mother of innovation: 

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 , estimates that meeting the demand growth for copper and nickel of such magnitude will require cumulative capital expenditures ranging from $250 billion to $350 billion by 2030. This funding is necessary for both expanding existing capacity and replacing depleted resources.

One of the exciting developments is the possibility to fabricate inexpensive, lightweight, ultra-conductive aluminum . Recent advances aim to enhance the conductivity of aluminum to replace copper in electric vehicles (EVs), which require twice as much copper as conventional vehicles. Moreover, copper's weight can reduce EV efficiency. With aluminum being approximately 60% as conductive as copper, it not only costs less but also weighs only one-third as much. The potential adoption of ultra-conductive aluminum as a substitute for copper could be a game-changer in our journey toward energy transition.

Recycling as a Competitive Advantage: 

With limited primary metal resources, recycling will become a crucial aspect of meeting the demand. Mining companies that excel in recycling and adopting sustainable practices will gain a competitive edge in the market. Efficient recycling technologies and processes will be vital to recovering metals from discarded products and integrating them back into the supply chain. Aluminium, copper, iron, and steel are the most common metals recycled.

Recycling presents a tremendous opportunity for North American companies to secure scrap and process copper. To offset the growth in demand and ever-increasing red tape associated with new mining projects, I believe recycling needs to be included in companies’ production and operating strategies

More pipe dreams, ie. Space 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 Space Resources Roundtable (SRR), an initiative that has been ongoing since 1999 at the Colorado School of Mines , has been accommodating technical presentations and roundtable discussions around space-resource activities on the moon, Mars, and small bodies, space manufacturing and construction, space infrastructure, commerce, international efforts, and legal and public policy issues.

The impending threat of depleting metal supplies due to exponentially increasing demand requires immediate attention and proactive measures.

As consumers, we can play a significant role by supporting companies that prioritize sustainable practices, recycling, and responsible sourcing of metals. By making conscious choices and demanding transparency in supply chains, we can contribute to a more sustainable and equitable metal industry.

Alp Bora

Chicago

January 9, 2024