What would an accelerated energy transition mean for metals and mining?

From soaring Li-ion demand to a cobalt trilemma, and the rare earth winners and losers

3 minute read

The metals and mining sector is a critical enabler of the energy transition. From the lithium in EV batteries to the rare earths in wind turbine generators, mined commodities are integral building blocks of low-carbon technologies. But with soaring demand comes the risk of supply bottlenecks that could limit the pace of change.

In a new series of reports, our metals and mining experts explored the outlook for some of these key commodities under our Accelerated Energy Transition 1.5-degree (AET-1.5) scenario. Fill in the form for a complimentary extract from the Li-ion battery, cathode and precursor, lithium, cobalt and rare earths editions. And read on for a few highlights.

Lithium-ion batteries: deficiencies will appear upstream

Max Reid, Senior Research Analyst, Battery & Raw Materials Service:

The lithium-ion (Li-ion) battery is undoubtedly a keystone energy transition technology. It’s indispensable for transport electrification and no alternative technology is currently manufactured at a scale needed to satisfy projected EV demand.

In an AET-1.5 scenario – in which the rise in global temperatures since pre-industrial times is limited to 1.5 °C by the end of this century and we reach net zero by 2050 – EV sales double by 2030. Demand for Li-ion batteries for energy storage systems would quadruple by 2050. As a result, more than US$0.6 trillion of investment is needed to build out cell and cathode production alone.

Cathode and precursors: collaboration will be key

Egor Prokhodtsev, Senior Research Analyst, Transportation & Mobility

We are still at the early stages of a long journey for the EV and storage sectors. Challenges are coming to scale up and develop each step of the production chain, from mine sites through to sulphate, precursor, cathode and battery production.

Meeting the AET-1.5 scenario goals will require an extra 6.6 TWh of cell production by 2050 – a gap that can be filled by adding an extra 165 gigafactories operating at 40 GWh production. Meanwhile, the deficit for cathode active material (CAM) materials would reach 8 TWh, requiring investment of US$78 billion into new CAM production facilities.

Lithium: supply deficit will put upward pressure on prices

Allan Pedersen, Principal Analyst, Lithium:

We forecast that lithium demand in an AET-1.5 scenario will increase 62% compared to our base case, reaching 6.7 million tons by 2050. This represents a market nine times larger than the total lithium demand in 2022.

Lithium supply will struggle to keep up. As an increasing number of mines reach their end of life, supply from recycled materials will become increasingly important, eventually becoming the largest source of lithium.

The forecast supply deficit will partially be met with supply from new and unknown sources. As the market expands these sources could be of lower quality – and higher cost.

A trilemma of sorts is emerging around capital requirements for cobalt.

Cobalt: a three-sided challenge to fulfil demand requirements

Ying Lu, Senior Research Analyst, Cobalt:

Cobalt demand from battery applications is estimated to be 40% higher by 2050 under the AET-1.5 scenario. Market imbalance will emerge in the early 2030s as operations and projects in the pipeline fall short of demand. Recycling, if fully utilised, can delay the deficit to 2040. But it cannot fill the entire gap.

A trilemma of sorts is emerging around capital requirements. First, to reach zero emission targets, an additional US$30 billion investment will be required by 2050 to build up capacity. Second, capacity expansions and commissioning will become more constrained by increased ESG scrutiny and rising development costs under AET-1.5. And third, to secure supply, consumers will have to make hard decisions between security, sustainability and affordability.

Rare earths: winners and losers in an accelerated energy transition

David Merriman, Research Director, Rare Earths:

The rare earths have been long associated with high-tech, energy-efficient components, but their use is also ingrained within petroleum refining and internal combustion engine vehicles. An AET-1.5 scenario is therefore a mixed bag for this category.

On the one hand, growth from permanent magnet applications will deliver a particular boost to neodymium and praseodymium oxide demand. On the other, declining demand from catalyst applications will impact lanthanum and cerium.

Overall, demand for rare earths increases 10.2% under AET 1.5. Supply has limited ability to react – a short-medium term supply deficit would put existing producers under significant pressure.

A closer look at the outlook for key mined commodities

Our report series on metals and mining under AET-1.5 explores the outlook in detail. Subscribers can access the series via our customer portal. Alternatively, fill in the form at the top of the page for a complimentary extract.


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