Home Sustainability and Eco Friendly initiative news Can the mining sector keep up with demand for critical minerals? | Greenbiz

Can the mining sector keep up with demand for critical minerals? | Greenbiz

Can the mining sector keep up with demand for critical minerals? | Greenbiz

Can global production of lithium, rare earth elements, nickel and cobalt keep pace with soaring demand from manufacturers of electric vehicles, solar panels and wind turbines as the clean tech transition gathers momentum?

It is a question hotly debated in energy and investment circles, as concerns grow that countries could replace their reliance on imported fossil fuels with a reliance on critical metals and minerals, production of which is largely monopolized by China.

Discussions on how to diversify supplies of energy transition metals and improve the environmental credentials of rare earth supply chains are leapt upon by fossil fuel interests and their advocates to question the feasibility of the net-zero transition. At their most cynical, reports highlight the environmental footprint of clean tech raw materials while completely glossing over the fact the net-zero transition will depend on the extraction of roughly the same tonnage of minerals over 30 years as is extracted by the oil and oil industries every six weeks.

But despite the spin from various vested interests, the question of whether mineral and metals supply chains can keep up with booming demand from fast-expanding clean tech industries is a serious one.

The transition away from fossil fuel-based technologies and towards electric alternatives will depend on a huge increase in the mining and processing of nickel, rare earth elements, lithium and cobalt. As such, governments, businesses and investors the world over are debating whether the mining sector — an emissions-intensive industry already grappling with an unprecedented skills shortage — can expand, transform and decarbonize fast enough to enable clean tech deployment at the necessary pace and scale. At the same time, discussions continue over the extent to which increased recovery and recycling of metals and minerals can be relied upon to ease demand for virgin materials in the first place.

Management consulting giant McKinsey & Company has recently waded into this crucial debate, publishing a research note that predicts the world is on track for metals and minerals shortages that could slow the pace of decarbonization. It forecasts that by the end of this decade, nickel will experience a “modest shortage” accounting for between 10 and 20 percent of projected demand. Dysprosium, a rare earth metal used in most electric motors, could see shortages of up to 70 percent. McKinsey stresses that these shortages should prove “temporary” as they are linked to limited mining, processing and refining capacity for these minerals, rather than a physical absence of the necessary materials. But such supply chain bottlenecks still have the potential to hamper global decarbonization efforts.

The good news, according to the consultancy, is these projected shortfalls can be addressed, through a global effort to ramp up the supply of metals and minerals coupled with a simultaneous push to reduce demand for minerals where possible.

The more sobering news is that closing the gap will require a herculean coordinated effort from governments and business to rapidly expand the mining sector and metals supply chains. The report calculates investment in mining, refining and smelting will need to increase to about $3 trillion to $4 trillion by 2030, or about $300 billion to $400 billion per year. The mining sector’s workforce, meanwhile, will need to double in size from 300,000 to 600,000 specialized professionals, it predicts. Such a task will prove no mean feat for a sector already facing major employment and skills challenges.

This rapid expansion in minerals production will depend on a significant chunk of clean energy capacity being ringfenced for energy-intensive mining, refining and smelting operations, McKinsey notes. The report estimates that up to 5 to 10 percent of estimated solar and wind capacity by 2030 will need to go toward powering clean energy transition materials production — equal to roughly 200GW to 500GW of capacity.

McKinsey also highlights the importance of policymakers and businesses working to reduce demand for mining and materials, by accelerating the development of less materials-intensive techniques or technologies that require materials that are less constrained. And it acknowledges the role innovation must play in exploring the potential for alternative raw materials. Recycling is also mentioned in the research note, which calls on investors to consider focusing on enhanced “recycling practices for new materials,” as well as “innovative solutions to increase the throughout put of existing assets.”

The urgent need to close gap between supply and demand for transition materials should not be understated, according to McKinsey. “The extent to which global materials supply chains can keep up with new and accelerating sources of demand will be a critical determinant of global decarbonisation rates,” the report warns. Current projected shortfalls would “likely hinder the speed of global decarbonisation,” it said, because they would slow the pace at which customers can shift to low-carbon alternatives. They are also likely result in price spikes and volatility that could send clean energy technology costs soaring, it said. 

The consultancy’s findings broadly align with those of the International Energy Agency (IEA), which has warned of a “looming mismatch” between the world’s climate ambitions and the supply of minerals. But the think tank similarly concluded these challenges are not insurmountable and can be addressed if governments and businesses scale up recycling capacity, boost production capacity and encourage international collaboration so as to diversify supplies.

This task is accompanied by an urgent need to promote best practices across the mining industry and address ongoing concerns over environmental and human rights impacts linked to mineral and metal supply chains. Last week saw the publication of a report from the Business and Human Rights Resource Center, which identified 102 alleged abuses in 2021 and 2022 linked to Chinese mining interests across 18 countries.  

As governments around the world look for ways to diversify mineral supply chains and challenge China’s dominance — with the lessons of over-dependence on one country for fossil gas still being felt in real time — McKinsey’s report should serve as both a warning and a cause for optimism. Clearly, the transition to net zero will prove extremely challenging without a robust, well-thought-out plan to ensure minerals supplies keep track with demand. But the good news is that, with the right investments and policies, there is still time to respond to current market signals and bring online the mining and processing capacity necessary to keep the global clean tech boom on track.


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