Metal Demand Soars as Green Revolution Drives Prices

The demand for green energy metals will increase by more than 400 percent by 2030, the Energy Transition Commission (ETC) announced.

However, the supply cannot keep up with it. Below is an image based on analysis by Appian Capital Advisory that provides an overview of what the deficits will look like by 2030. It is also stated how large investments are needed in order to avoid the deficit and bring the market into balance. Both ETC and US Geological Survey data were used in the analysis.

In total, hundreds of billions of dollars should be invested to increase green energy metal mining.

Which Materials are Most Important?

The transition to green energy is an ambitious plan that requires more than just technological innovation. It also requires a huge amount of materials, such as:

• Graphite and Cobalt: Critical Metals in Electric Cars and Energy Storage Devices.
• Nickel: A very important metal for improving the performance of batteries, as well as used in wind turbines and hydroelectric technologies.
• Copper: necessary in electrical wires and building energy infrastructure.
• Lithium: a very important material in electric car batteries and energy storage devices.

Huge Increase in Demand

If the current green revolution continues in the same way, we will see a very significant increase in demand for a large number of metals. In addition to the aforementioned metals, several precious metals, such as platinum, palladium and silver, are also very important. ETC predicts that demand for silver from so-called clean energy technologies will quadruple its current level by 2050.

At the moment, it is not seen that the politicians are focusing on the most important thing, which is the extremely rapid increase in mining production.

For example, building a copper mine from scratch can take up to 20 years

Interest in this topic seems to be abysmal, which is why we could expect the markets to experience colossal shortfalls over the next 10 years. However, large deficits cause large price increases.

Commodity prices tend to move in cycles lasting decades. The last bullish cycle ended in 2011, when China’s infrastructure investment boom ended. In the 2000s, China built massive amounts of roads, bridges, tunnels and other infrastructure, driving commodity prices higher. After the boom ended, the prices of several industrial metals fell by more than half and remained at low levels throughout the 2010s.

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Some may say that 2020 saw the start of a new upward cycle for raw materials that will last for decades. The main fuel for this will be the green revolution and the growth of energy and commodity demand in developing countries in the long term.

The Green Revolution is Inflationary

Raw materials could be considered quite undervalued compared to other asset classes.

Raw materials, especially energy, are the most important input to the economy. If their prices rise, it tends to raise the prices of all other products as well. If we add to this the fact that the cost of carrying out the green revolution reaches tens of trillions of dollars, and the debt levels and budget deficits are already colossal, then the money for this will probably be borrowed.

However, citizens will eventually pay for it through inflation

The green revolution is an extremely inflationary process. And inflation tends to feed itself, because these same raw materials provide protection against inflation. When investors start flocking to commodities, their prices rise even faster, which in turn fuels inflation.

Key Takeaways

The green revolution represents a monumental shift toward a sustainable future in the supply chain, but it also presents significant challenges in securing the materials needed to power this transformation. With demand for key metals projected to soar by over 400 percent by 2030, the supply-side response appears woefully insufficient, portending substantial shortages and inevitable price hikes.

The slow pace of new mining projects and the staggering investment required underscore the urgency for action if we are to balance the market and achieve our green energy goals in the short term and long term.

Furthermore, as raw material prices increase, so too will the costs associated with the green transition. This, in turn, could drive inflation, adding a layer of complexity to an already delicate global economy. Policymakers, investors, and industries must therefore consider not only the technological advancements needed but also the economic and material frameworks required to sustain the transition.

Without a strategic approach to ramp up resource production, the green revolution could come at a higher cost than anticipated, both financially and socially. The road to a greener future is set, but it will require unprecedented levels of investment and cooperation to ensure it is a path we can afford to tread.