58 Keep digging How to avoid a 6.sbn-tonne green-metals crunch [VERYONE WANTS more metals. In recent months Britain has inked a deal with Zambia, Japan has sealed one with Namib- ia and the Ev has shaken hands with Chile. ‘The bloc’s negotiators also started talks ‘with the Democratic Republic of Congo; America's, meanwhile, visited Mongolia. ‘This seattershot campaign, which is also targeting the Philippines and Saudi Arabia, hasasingleaim: obtaining the minerals re quired for rapid decarbonisation. Seventy-two countries, accounting for around 80% of global emissions, have ‘committed themselves to net-zero targets. According to the Energy Transitions Com- mission (ete), a thinketank, hitting them by 2050 will require 15 times today’s wind power, 25 times more solar, atripling ofthe arid’s size and a Go-fold increase in the feet of electric vehicles (evs). By 2030 cop- per and nickel demand could rise by 50 70%, cobalt and neodymium by 350%, and graphite and lithium six- to seven-fold. All told, a carbon-neutral world in 2050 will need 35m tonnes of green metals a year, predicts the International Energy agency, an official forecaster. Adding aluminium andsteel, the ercexpects demand between ‘now and then to exceed 6.sbn tonnes. ‘This is why policymakers fear an al- ‘mighty supply crunch. The ETC expects shortages of market-breaking magnitudes by 2030: some 10-15% for copper and nick- el, and 30-45% for other battery metals. When dwindling stacks cause prices to rise, producers wll lft outputand custom- ers will use scarce materials more effi- ciently. Whatdemand remains unmetafter this will be destroyed, however, as would- be buyers that cannot or will not pay high- er prices are forced from the market. Too {60 Buttonwood: Diamonds aren't forever 61 Property takes offin India 61 Americas student-loandrag 62 Europe's mighty centralbank 63 Free exchange: China's bleak future much of such demand destruction will kill the green transition, The question, then, is simple. Can the crunch be minimised? Startby considering the metals in ques- tion. Three are widely used in industry: aluminium and steel for panels and tur- bines, and copper for everything from ca- bles fo cars. Then come those powering vs: cobalt, lithium and nickel, which make up battery cathodes, and graphite, the main anode element. Except for nickel, which is also an ingredient in stainless steel, all these have only niche applica- tions, The last group features magnetic rare earths like neodymium, found in ev motors and turbine generators. These are required only in minuscule amounts. “The search for such metals is made slightly less urgent by adiscomforting fact: climate policies are unlikely to restrain slobal warming to 15°C above pre-indus- trial levels, as assumed by most forecasts. ‘Moreover, many future-gazersalsoassume that demand for green gear, and thus met= als, will rise in a linear fashion, even ‘though some countries will no doubt start to sprint only in the final yaeds. Stel, for ‘which green uses will remain a drop in the ‘ocean, will probably stay abundant. Co- balt, 2 byproduct of other sought-after metals, may outpace demand for ever. But difficulties remain, Industry ora- cles asked by The Economist predict copper- supply gaps of 2m-am tonnes, or 612% of potential demand, by 2030. They also fore- see a shortfall of lithium of 50,000-‘The Economist September 1th 2023, 100,000 tonnes, a 2-4% deficit. Nickel and sraphite—plentiful intheory—could cause problems because batteries require pure ‘material, There are too few smelters to re- fine bauxite into aluminium, Outside Chi- na, next to no one produces neodymium. ‘These will be hard problems to over ‘come. Yer three levers may lower the pres- sure, First, producers may extract more supply fromexisting sources, which can be done straight away but will produce limit- ‘ed quantities, Second, firms may open new mines, which could solve the problem en- tirely but will ake time. The limitations of these two levers make a third the most im- portant, atleast over the next decade: find- ing ways to change what customers want. Quick wins could come from reusing more material, Such gains will be greatest for aluminium, copper and nickel. All are ‘widely recycled, but higher prices will mo- tivate spending in a fragmented industry. BHP, a big miner, has backed a nickel-recy- cling upstart in Tanzania. Huw McKay, the firm’s chief economist, reckons that scrap could represent 50% of the total copper supply in a decade, up from 35% now. Rio Tinto, another mining giant, is investing in aluminium-recycling centres. Last year startups focused on battery-metal recy- cling raised $500m, a record, More metal could come from restarting mines. Not many ate idle: a post-covid surge in demand has already reduced slack. Even if prices double, cost curves for copper and nickel indicate that just a few mines would reopen. But aluminium isan important exception. Since December 2021 soaring energy costs have caused 1.4m tonnes in annual smelting capacity (2% of the world’s) toshutin Europe. A25% rise in prices would lure much of that back, reck- ‘ons Graeme Train of Trafigura, a trader ‘The greatest hope lies in technologies that squeeze supply from deposits. New firms are developing chemical processes that extract copper trom ores with low metal content, making waste exploitable. Using the tech at scale could yield an extra 1m tonnes of copper a year without much cost, says Daniel Malchuk of fetti Resoure- es, one such firm. Meanwhile, in Indone- sia, the world’s largest nickel producer, miners are using “high-pressure acid leaching” toturn low-grade ores into mate- rial fit for electriccars, Three billion-dollar plants have been built, and nearly $20bn- ‘worth of projects have been announced. Daria Efanova of Sueden Financial, a bro keer, reckons that Indonesia could produce 400,000 tonnes more of top-grade nickel by 2025, filling part of the 900,000-tonne supply gap she projects by 2030, Yet these new techniques are uncertain, and in some cases come with drawbacks such as pollution. Starting new mines, the second lever, would bring larger gains, even if slowly. MeKinsey, a consultancy, - Green steel Forecast curative demand fo gobs) ecaonisation by 2507 tonnes ic 99 xhiere8 ‘Neodymium? +Unnin23 She pln pitrum oa Seve FE Tate Conon “ren calculates that if the 382 projects in cobalt, copper, lithium and nickel that have at Teast commenced a pre-feasiblity study ere to be finished by 2030, it would keep ‘markets just about balanced. These pro- jects would represent a huge increase in production: there are around 500 cobalt, copper, lithium and nickel mines operat. ing at present. To open on time, they will have to overcomea number of difficulties, Full metal racket ‘The first is a lack of funds. McKinsey esti ‘mates that to fil supply gapsby 2030 annu~ al capital expenditure in mining will have to double o $300bn. ckv, another consul- taney, reckons that spending on copper alone must hit $22bn in 2027, compared with an average of $35bn in 2016-21. Al- though not yet fast enough, investment by big miners is rising, Customers are enter- ing the fray, too. General Motors, a carmak- 15 10 im © om oD Freon eco toe 0 0 a m0 0 aw Sane COMKLMESFE —“Anetaretinets Finance & economics 59 cr, is investing $650m in Lithium Amer ‘as, a miner in Nevada. cart, a Chinese battery firm, is spending billions to source cobalt and lithium, Since the start of the year pension and sovereign funds have in- vested $3.7bn in private mining assets, the most ince 2013. And about Saibn in capital raised by private-equity firms since 2010 is, also chasingdeals. ‘This will take time to makea difference, however, since digging new mines takes ages—from four to seven years for lithium to an average of 17 for copper—and delays have been worsened by a paucity of pe mits. Egged on by activists, governments. and regulators are increasingly blocking projects on environmental grounds. Be- tween 2017 and 2021 ittookan average of 3. days fornew mines in Chile togain appro al, compared with 139 in 2002-06. Mean= while, the metal content of copper ores mined in stable countries is falling, forc~ ing miners to look todicier locations. Two- thirds of the new supply planned by 2030 sits in countries that in 2020 ranked below goth in the World Bank's “ease of doing business” index. Reko Dig, a projected by Bartick Gold, a Canadian firm, containing ‘one of the world’ largest untapped copper {deposits sits between Iran and Pakistan. As a result, new supply will be a sol- ution only in the long run, pethaps after a spell of high prices, The lion's share of ad- justment in the next decade will come down todemand—the third lever. Thisside of the equation, which is more difficult to model than future production, is poorly understood. But itis probably more flexl- ble than is commonly realised. Auto- and battery-makers area type of buyer the metals market has never had be- fore. Fiercely innovative and price-sen: tive, such firms tackle issues at the frst sign ofa supply squeeze. They have already achieved alot by “thrfting’, or discovering, ‘small ways t0 use less metal. The typical clectric-car battery now contains just 69k, ‘of copper, down from 8okg.in 2020. Simon ‘Morris of cRu reckons that the next gener ation may need just 21-5okg, saving up to 2m tonnes of coppera year by 2035. Morecan beachieved through substitu- tion. Nickel-manganese-cobalt chemi tries that contain as much cobalt as nickel, ‘known as NMtc my, are being phased out in favour of NMC 721 and 81, which contain more nickel. These account for a quarter of y-battery cathodes, up ftom zero in 2017 ‘Meanwhile, a cheaper but less energy: dense ithium-iron phosphate (rp) mix is ‘conquering the booming Chinese market, where city-dwellersareless concerned bya shorter driving range. Indeed, LeP now rep- resents 30% of EV cathodes worldwide. Graphite anodes are also being doped with silicon, which is hyperabundant. in ‘March Tesla, an ev-maker, said it would build a motor that did not need rare earths. »»