According to experts, by 2040, the demand for clean energy technologies is expected to quadruple. In fact, from expanding wind farms and building new solar panels, to producing electric vehicles (EVs) and advanced batteries for reliable energy storage, the transition to using green energy is already accelerating at an ever-quickening pace.
All of these activities are heavily reliant on key metals such as lithium, cobalt, nickel, and copper. As a result, the expectation is for the demand, supply, and price of these metals to fluctuate drastically during the rest of the decade and beyond.
Anuj Madaan, senior specialist at The Smart Cube, explained to us how the rise in clean energy technologies is placing pressure on the metals market:
“The production of EVs and advanced batteries for reliable energy storage, and the expansion of electricity networks will contribute to an increase in the demand for lithium, cobalt, nickel and copper, putting all these metals at high risk for supply disruption in the years to come,” he said.
Copper and lithium have similar behaviour patterns
Taking a closer look at the supply, demand and price of two of these commodities – copper and lithium – there are similarities in their market behaviour. The copper market is expected to be in surplus in both 2024 and 2025, thanks to new mine operations in Chile and Peru.
Lithium, meanwhile, is predicted to remain in surplus for even longer, until 2027, due to a projected 33 per cent growth in production between 2022 to 2025.
However, the growth in clean energy technologies means that these surpluses won’t remain for long. For instance, after 2025, supply growth for copper is expected to slow down, and the metal will be in a deficit of 3.5 million tonnes by 2030. Likewise, there will be a deficit in lithium from 2028, with an increase in demand for lithium-ion batteries set to significantly tighten supplies.
“In the short term, there are other factors that are placing additional pressure on these metals,” explains Madaan. “Resource-rich countries have decided to take greater control over their resources to increase government revenue and ensure maximum local benefit from resource extractions. Major producers of lithium, cobalt, nickel and copper – including Chile, Peru, and Indonesia – have already introduced several measures such as regulations, taxations, and export restrictions on these metals.”
With the top three producing countries for these metals accounting for more than 50 per cent of the global supply, measures like these are inevitably driving prices up.
Investors and buyers will need to pay attention to politics
Ultimately, successfully adapting to fluctuations in supply, demand, and price necessitates enabling a proactive, systematic, and data-driven inflation monitoring system for each of these metals that closely monitors policy changes by different economies and broader financial, economic, and business indicators.
This helps identify early signals of distress and integrates them with companies’ internal data to generate actionable insights that can be used to mitigate risks. For investors, it means keeping close tabs on the evolving political situations in some of these countries.
Just as we have seen oil producing countries like Saudi Arabia exercise more control over strategic natural resources the rest of the world needs, there is nothing stopping countries with large lithium or copper reserves from doing the same. This has some mining investors already questioning just how free the flow of copper and lithium out of South America or Africa will actually be in years to come.
