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McKinsey: Key Metals Shortages Could Slow The Energy Transition

Looming shortages of critical metals enabling the energy transition could slow the uptake of renewables and low-carbon solutions, McKinsey & Company warns.

Supply of nickel, copper, lithium, cobalt, tin, iridium, and rare-earth element dysprosium faces shortages this decade, which would raise metals prices, supply chain pricing, and the price of finished products such as EV batteries or solar panels, the consultancy said in a report cited by Bloomberg.

According to McKinsey, nickel shortages could be 10-20% by the end of this decade, while dysprosium – used in electric motors – could see a 70% supply gap.

Investment in mining and metal smelting and refining need to rise exponentially this decade compared to the previous decade, for shortages to be avoided, McKinsey says. 

Analysts and industry players expect demand for metals critical for the energy transition to spike in the coming years, while supply is playing catch-up, at least for now.

Investment in new mining hasn’t taken off yet.

This year’s investment in metals mining is set to rise by 3% year over year to $149 billion, with copper leading growth, but the level of investment will still be barely above the lows of the downcycle, Wood Mackenzie said earlier this year.

“There is little sign yet that the mining majors are prepared to loosen the shackles and embark on a new phase of organic investment in the new capacity critical for the transition – copper, cobalt, lithium, nickel, and aluminium among them,” WoodMac’s Chairman and Chief Analyst Simon Flower wrote.

Copper prices are likely to hit a record high in the next 12 months, commodity trading major Trafigura said earlier this year, citing the rebound in China’s economy and short supply.

At the World Economic Forum in January, Trafigura’s chief executive Jeremy Weir said, “If we want to reach net zero by 2050, we need to have two-thirds of energy from renewable sources by 2030. In that scenario, we need a 20% increase in production per annum of copper.” 

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By Tsvetana Paraskova for Oilprice.com

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