As the world progresses through this “energy transition,” one stark reality becomes increasingly clear: Mineral resources lie at the base of every source of power in current use by mankind.
Oil and natural gas have been at the top of mind in recent months as national governments in Europe engage in a scramble to secure adequate supplies needed to keep their economies running and constituents safely warm and fed across the coming winter. That other energy source critics like to refer to as a “fossil fuel,” coal, has also been the subject of much attention as demand for it and usage of it continues to surge as the global economy recovers from the COVID-19 pandemic and nations like China and India place more focus on economic and energy security than on their carbon emissions.
We also spend a lot of time talking about the chosen alternatives to those fossil fuels, but until recently, few have spent much time discussing the array of critical mineral resources that make wind power, solar power and electric vehicles (EVs) go. Democrats in congress are so focused on ensuring the growth of these three rent-seeking industries that they just bet their political party’s future on them, passing a massive, $740 billion spending and subsidy bill on a strictly party line vote.
Subsidizing more gigantic windmills, solar arrays and F-150 Lightnings into existence is but one piece of a vastly larger puzzle. A far more difficult, complex and often perilous undertaking is involved in securing the sources and global supply chains for the energy minerals that go into them. Minerals like lithium, cobalt, tungsten, antimony, silver, nickel: All of these minerals and more are integral to piecing the puzzle together. They must be mined in increasingly massive quantities, they must be processed and refined, and they must be transported, often across thousands of miles of land, air and ocean, in specific quantities to specific locations at specific times to enable any of these energy sources to provide a benefit to humankind.
It is a massive, daunting challenge.
No mineral resource is more crucial to every moving part of this transition than copper. Due mainly to its relative abundance and high degree of conductivity, copper has been a preferred metal in electricity applications since the days of Nikola Tesla and Thomas Edison. A new study published in July by S&P Global describes copper as “the metal of electrification,” adding that “Unless the impending supply gap for “the metal of electrification” is closed in a timely way, Net-Zero Emissions by 2050 will be short-circuited and remain out of reach.”
Frank Hoffman, consulting principal for S&P Global Market Intelligence and one of the project leaders for the study, told me in a recent interview that “unless urgent action is taken, unless people start working on the problem now, there would not be enough supply to meet the demands of a Net-Zero Emissions by 2050 world. Work absolutely has to begin soon to keep the energy transition on track with the current timelines related to stated policy goals.”
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One of the key findings of the study, titled “The Future of Copper,” is the urgent need for copper supply to rise rapidly over the next dozen years to accommodate the needs of the energy transition. The study finds that global copper demand will roughly double by 2035, from the current 25 million metric tons (MMt) today to nearly 50 MMt. That is the equivalent of demand for crude oil rising from its current ~100 million barrels per day market to 200 MMbopd in such a short time frame. It is a truly monumental challenge. No one believes that would be possible in today’s world with an extractive industry like oil drilling, with all its associated impacts. Copper mining is an extractive industry, too, with significant impacts of its own.
Making that near-term challenge even more difficult to conceive is the study’s finding that demand for this critical mineral will rise even further, to 53 MMt, by 2050, and remain at elevated levels into the future. Like oil, gas and coal, copper is known to exist in abundance, but one can almost envision a new “Peak Copper” cottage industry springing up to preach doom about it all.
The good news here comes in the fact that copper is efficiently recyclable and can be substituted by other conducting metals in some instances. The bad news comes in the limited substitution opportunities that exist, the strain that a high degree of substitution efforts could put on global supplies of other minerals like aluminum and silver, and, as Hoffman told me, the reality that material substitution alone won’t be enough to fill the looming shortfall.
“Aluminum is substituted for copper in a lot of wire and cable,” he said. “This particularly happens when the price of copper exceeds aluminum by 3.5 to 4 times. But, there’s a limit to how much aluminum can be substituted for copper due to conductivity properties. For example, it’s really not feasible in undersea wiring and cable, or in electric vehicles. Silver is also a good conductor, a little bit better than copper, but obviously there is a substantial price premium there.”
Nor can the gap be closed by the opening of new mines alone. Hoffmann sees some hope that the so-far-unseen permitting legislation supposedly agreed-to by Senate Majority Leader Chuck Schumer in his deal with West Virginia Senator Joe Manchin to get the just-passed “Inflation Reduction Act” done might help facilitate the opening of more copper mining operations in the U.S. in the coming years. But, he said, “the supply gap isn’t going to be closed by the openings of new mines alone. In order for opening of new mines to fill the gap, that would be the equivalent of the opening of 3 new Tier 1 mines each producing 300,000 metric tons of copper per year every year for the next 29 years. That isn’t going to happen.”
No, it obviously isn’t. This brings us to the other big issue here, which is the timing of it all. Even if the Democrats in congress and the Biden administration were to suddenly decide to start issuing permits for new mines – something the administration has balked at doing over its first 19 months – the timeline to first production from any new mine is quite long. In a 2021 study, the International Energy Agency (IEA) estimates that more than 16 years are required to fully develop a mine from resource discovery to first production. For any new mine, the target year of 2035, by which global demand is projected to double, will have come and gone before the first ton of ore is extracted from the first new mine.
The same issue of timing applies to the development of new technologies which can facilitate higher recovery rates from existing mines and recycling efforts: The big breakthroughs, if they come about, are years in the future. But demand is rising now.
A daunting challenge, indeed. Now, realize that all of these challenges and more are also being faced by the industries that supply, refine and transport all those other mineral resources listed earlier in this story. All of these challenges must be solved now, in the coming decade, if any of the aggressive energy transition goals set by the Biden administration and other western governments are to be achieved.
If you’ve been wondering why the price for that EV you’ve been scoping out seems to go up every 2-3 months, well, now you know. The bad news is, the price increases are most probably just getting started. The future comes at you fast.