The mining sector has a range of environmental and social impacts that can make it hard to square with a responsible investment approach.
However, society is increasingly reliant on the sector’s outputs as we seek to accelerate the energy transition, which is already driving increased demand for “transition metals” like copper and lithium.
Energy transition is driving copper demand growth
As we seek to mitigate the climate crisis and move to a lower carbon economy, an enormous expansion of low carbon technologies like renewable energy and electric vehicles (EVs) is needed, bringing an accompanying growth in demand for the metals these technologies require.
Solar PV, onshore wind and offshore wind require roughly 2.8, 2.9, and 8 tonnes of copper per MW of new capacity in comparison to the 1.15 tonnes/MW needed for conventional coal-fired power generation[1].
On the transport side, full battery EVs require around 2.5 times more copper per vehicle than a traditional internal combustion engine. They also require new extensive charging networks, ideally powered by renewable electricity.
Copper for “green uses” only makes up around 6%[2] of current consumption, with construction (29%), “legacy” electrical networks (27%) and consumer products (22%) having the largest shares[3].
However, demand for copper in electromobility and renewables is expected to account for nearly 40% of total growth over the next 20 years[4], with Wood Mackenzie estimating that global copper demand will be 50% higher in 2040 than today[5].
Should the world pursue the more challenging decarbonisation pathway required to bring us into alignment with a 1.5C scenario these figures will only increase.
Copper supply will not keep pace
New mining capacity is needed but there is decreasing public and political support for the new projects needed to feed demand, particularly in developed markets. A focus on higher grade deposits is also required, as extracting metal content from lower grades is more energy intensive, costly and polluting.
Estimates vary, however there is consensus that underinvestment in supply combined with growth in demand will lead to a shortfall of around 10% of annual copper demand by 2030[6].
Fortunately, copper can be infinitely recycled without diminishing its chemical or physical properties. As prices rise and technology improves we are likely to see an increase from today’s 15-20% recycle rate[7], which could somewhat offset the need for new mines and the issues that accompany them.
Resource efficiency will also play a part, as we saw when the reduction in silver and silicon content of solar cells over the past decade enabled increased solar deployment.
Overall, we expect “green demand” for copper to nearly quadruple throughout this decade, to over 17% of total copper demand.
Other transition metals
The trends seen in copper are amplified for other transition metals with fewer alternative uses. EVs and battery storage are already the largest consumers of lithium, and the IEA’s Sustainable Development Scenario forecasts that clean energy will account for 60-70% of nickel and cobalt demand by 2040.
A concerted global effort to achieve net zero globally by 2050 would require six times more mineral inputs in 2040 than today[8].
