Climate Targets at Risk, More Mining Is Needed

A decline in investment, market volatility and higher market prices for key metals and minerals needed for the green transition could hinder the world's sustainable goals, consultancy McKinsey & Company has warned. 

The 2015 Paris Agreement stated that emissions must be reduced by 45% by 2030 to limit global warming to no more than 1.5°C. McKinsey & Company emphasized that demand for minerals and metals has increased in recent years as green energy technologies require them. However, low commodity prices and the decline in investment will hamper the supply of these minerals.

The consultancy highlighted that the minerals and metals where supply problems are foreseen are lithium, nickel, graphite, cobalt, boron and copper. According to its analysis, there will be a 20-50% shortage in metals and minerals needed for renewable energy production. For example, by 2030, 50% of the total amount of cobalt and rare earths and 36% of nickel resources are expected to be used exclusively for electric vehicle batteries. McKinsey & Company therefore emphasized the need to increase the number of cobalt, copper, lithium and nickel mines by 76%, from around 500 mines to almost 900.

The consulting firm stressed that the growing demand for these minerals and metals is opening up commercial opportunities. “Our analysis shows commodity trading pools have nearly doubled year over year, reaching nearly USS$100 billion in 2022. Metals and minerals will make up an increasing share of the value pool in the coming years,” said Roland Rechtsteiner, Partner at McKinsey.
However, the consultancy stresses that investors are cutting back on financing new projects due to low prices and long lead times, exacerbating supply chain problems. Spencer Holmes, Associate Partner at McKinsey, said the decline in investment in new projects is also due to the fact that many companies are more likely to invest in new technologies or have an inexperienced team.

To address the supply problem, McKinsey suggested that energy companies could expand into mining. In addition, traders could finance junior miners to help them advance their projects and gain access to the market. Finally, mining companies need to promote long-term supply agreements to continue financing projects.