Industry Trend Analysis - Copper, Aluminium, Lithium To Benefit From Transition To Low Carbon Economy - SEPT 2017
BMI View: The metals and mining industry will play a key role in the global transition to a lower carbon future, as low carbon systems have a more metal intensive composition than that of tra ditional fossil fuel-based high carbon systems. Copper, aluminium, lithium and cobalt demand will be supported by the transition, while policymakers and the mining industry will face the new challenge of balancing the shift to a low carbon future with sustainable metal extraction over the coming years.
The metals and mining industry will play a key role in the global transition to a significantly lower carbon future, based on low carbon electricity generation and energy-efficient technologies as per the 2015 Paris climate target of not exceeding 2 degrees Celsius (2degC) of global warming over this century. In fact, mineral resourcing and climate change are inextricably linked, not only because mining requires a large amount of energy, but also because climate change can only be tackled with an adequate supply of raw materials to manufacture clean technologies. The technologies required in the clean energy shift (renewable electricity systems and electric vehicles) are significantly more metal intensive in their composition than that of current traditional fossil fuel-based and high carbon systems. As such, we expect minerals and metals like copper, aluminium, lithium and cobalt to see demand supported over the coming years due to their role in low carbon systems.
|Miners To Shift From Coal To Copper|
|Copper & Coal - Number Of Mining Projects By Phase|
|Source: BMI Global Mines Database|
Electric Vehicles & Renewable Energy Systems To Buoy Copper Demand
Copper demand will remain steady over the next decade at least due to the rise of the electric vehicle market and gaining popularity of renewables. Mitigating transport emissions is a crucial aspect of addressing climate change, and electric vehicles attempt to do just that. The conventional internal combustion engine used in motor vehicles typically contains about 20kg of copper compared to 80kgs used in an electric vehicle. Additionally, both wind and solar power generation use greater copper per unit of electricity produced than non-renewable energy sources. For example, coal-fired power stations contain about 2kg/kW of copper, whereas solar utilises about 5kg/kW. Given that wind and solar generation are the two renewable technologies whose use will grow most in the coming decades to meet a low carbon future, we believe copper will be a significant beneficiary.
|Each New Generation Of Vehicles To Require More Copper Wiring|
|Amount Of Copper Required Per Vehicle Type (kg)|
|Source: Visual Capitalist, BMI|
Aluminium To Benefit From Lightweight Autos Trend
To help meet stricter greenhouse gases emission standards, the automotive sector will continue to support aluminium demand with innovations that allow the industry to cut vehicle weight. Lighter vehicles are more fuel efficient. In that respect, high-end luxury car manufacturers will remain the main users of lighter aluminium in place of steel in the automotive industry, as expensive vehicle pricing covers the higher material cost. Steel is approximately one-third the price of aluminium per tonne despite weighing three times as much. According to the Aluminum Association, aluminium body structures reduce automotive weight by up to 50% compared to steel body structures, absorb double the amount of crash-induced energy, require less fuel and can achieve up to a 17% reduction in CO2 emissions ( see 'Aluminium To Increase Role In Automotives', January 28, 2016). Tata's Range Rover has an all-aluminium body, and Volkswagen's Audi R8 body consists of aluminium and carbon fibre. Ford reportedly spent USD1.5bn redesigning two US plants to produce the aluminium F-150 pickup trucks, highlighting the increased cost per vehicle of switching to aluminium. However, US electric car company Tesla will reportedly not use the all-aluminium construction of previous, high-end models for the new Model 3, opting for cheaper materials to maintain the new car's affordability.
|Luxury Vehicles To Embrace Aluminium Early|
|Global Aluminium 3-Month & Carbon Steel Composite Price (USD/tonne, average)|
|e/f = BMI estimate/forecast. Source: National Sources, BMI|
Battery Revolution To Boost Lithium & Cobalt Demand
The battery revolution will support lithium and cobalt demand in the coming decades. The transition to a low carbon economy creates the demand for high-capacity, reliable battery storage devices. A lithium-ion battery can charge and discharge power over long and short timeframes, has relatively high energy density and boasts good cycle-efficiency. The production of lithium-ion batteries will continue to surge, underpinned by demand from various segments including portable electronics, residential and utility-scale electricity storage, and electric and hybrid vehicles ( see 'Battery Storage: Lithium-ion To Make Market Spotlight', September 16 2016). Subsequently, we anticipate solid global lithium demand growth over the coming years, driven by the growing role of lithium-ion batteries in key markets such as the US, EU and China. Cobalt is also required in the production of lithium-ion batteries and produced predominantly as a by-product of copper mines in the Democratic Republic of the Congo (DRC). Cobalt prices have increased by over 300% in the last 18 months due to supply fears.
|Consumption To Still Outpace Supply|
|Select Countries - Lithium Production Forecasts (000' tonnes)|
|e/f = BMI estimate/forecast. Source: USGS, BMI|
Challenge Of Balancing A Low Carbon Future With Sustainable Metal Usage To Persist
We believe that supplying clean technologies required for a carbon-constrained future will create challenges for governments, world organisations and mining companies with regards to simultaneously carrying out the sustainable development of minerals and resources. Simply put, a green technology future is materially intensive and, if not properly managed, threatens to counteract the efforts and policies of supplying countries to meet climate objectives and related sustainable development goals. It also carries potentially significant impacts for local ecosystems, water systems, and communities. Building low carbon energy systems that require vast amounts of metals and other raw materials, which cannot immediately be recycled, ultimately call for a shift to renewable energy to replace one non-renewable resource (fossil fuel) with another (metals and minerals). Additionally, easily mined ore deposits are quickly declining and although new resources will be found in the deep subsurface or in remote locations, mining these deposits will also consume large amounts of energy. As such, miners that are pursuing greener corporate strategies will benefit from long-term cost savings as global policy trends toward tighter emissions regulations ( see 'Metals & Mining Corporate Strategies For A Low Carbon Economy', August 23).
|e/f = BMI estimate/forecast. Source: National Sources, USGS, BMI|
|Copper Consumption, thousand tonnes||21,910||21,751||22,460||23,558||24,087||24,713||25,285||25,793|
|Copper Consumption, thousand tonnes, % y-o-y||5.3||-0.7||3.3||4.9||2.2||2.6||2.3||2.0|
|Aluminium Consumption, thousand tonnes||52,050||54,157||55,572||57,450||59,252||61,384||63,539||65,403|
|Aluminium Consumption, thousand tonnes, % y-o-y||7.1||4.0||2.6||3.4||3.1||3.6||3.5||2.9|
|Lead Consumption, thousand tonnes||10,946||10,859||11,082||11,218||11,603||11,729||11,877||12,004|
|Lead Consumption, thousand tonnes, % y-o-y||-1.8||-0.8||2.1||1.2||3.4||1.1||1.3||1.1|
|Nickel Consumption, thousand tonnes||1,868||1,920||1,975||1,942||1,966||1,947||2,012||1,967|
|Nickel Consumption, thousand tonnes, % y-o-y||4.7||2.8||2.8||-1.7||1.3||-1.0||3.4||-2.3|
|Tin Consumption, thousand tonnes||360||375||370||378||385||394||402||410|
|Tin Consumption, thousand tonnes, % y-o-y||15.6||3.9||-1.2||2.2||1.9||2.2||2.2||2.0|
|Zinc Consumption, thousand tonnes||13,733||13,462||13,936||14,173||14,400||14,740||14,986||15,126|
|Zinc Consumption, thousand tonnes, % y-o-y||4.5||-2.0||3.5||1.7||1.6||2.4||1.7||0.9|
|Steel Consumption, mn tonnes||1,670.32||1,592.10||1,606.81||1,636.50||1,644.64||1,655.51||1,654.93||1,674.72|
|Steel Consumption, mn tonnes, % y-o-y||1.4||-4.7||0.9||1.8||0.5||0.7||0.0||1.2|