Why the quest for cleaner energy is pushing up the prices of certain minerals
Four thousand years ago, the primitive Sumerian civilization in southern Iraq imported its copper from the land of Magan, which covered parts of the United Arab Emirates and modern Oman.
Metal was one of the two ingredients that made up the bronze alloy, whose tools and weapons gave them mastery over nature and over others.
Today, the transformation of global energy is making copper a crucial commodity again.
The metal – along with lithium, cobalt, rare earth metals and a few other substances – is one of the “critical minerals” that have become essential for the transition to new energy systems.
Reddish metal is an excellent electrical conductor that cannot be easily replaced.
It has been used in large quantities throughout history but its demand is set to increase sharply: an electric car needs five times more copper than a gasoline or diesel vehicle and a single wind turbine requires 4.7 tonnes. .
Metal is essential in electrical wiring for an “energy transition” from fuel combustion to reliance on electricity for travel, heating and industrial processes.
The other minerals all have their specific uses: lithium in car batteries and renewable electricity back-ups in electrical networks; money in electronics and solar cells; graphite, cobalt, nickel and manganese in batteries; rare earths in the strong magnets of wind turbines and electric cars; zirconium, platinum and palladium in fuel cells and electrolyzers for the production of hydrogen.
Many comments have focused on the geopolitical role of these essential minerals and China’s dominance in the extraction and processing of many of them, especially rare earths.
Sometimes deceptive analogies are applied to the dominance of oil geopolitics in the 20th century.
However, the most serious and imminent problem of the green energy revolution is simpler: a simple lack of supply, which drives up prices.
Already, a tripling of steel and polysilicon prices, as well as higher copper and freight prices, have started to drive up the cost of solar systems.
It is not for lack of minerals in the soil – contrary to the supposed reasons for the fear of “peak oil” of the early 2000s.
As with the commodities boom China induced in those years, this represents the collision of insufficient investment with a sudden surge in demand.
Post-coronavirus post-pandemic stimuli and easy money are intended to fuel traditional uses of metals as well as ambitious carbon reduction plans.
Capital spending for all mining activities peaked in 2012 at over $ 200 billion annually. Industry investment was barely half of last year and is expected to decline further.
Large mining and resource extraction companies, including petroleum entities, respond to shareholders’ imperatives to return money, not increase production.
New mines, such as those in Chile, the world’s largest producer, have significantly lower ore grades. Governments from Jakarta to Kinshasa are tightening their grip on industry, increasing taxes and local processing requirements.
The copper supply is sufficient for now, but it looks tight by the middle of the decade.
Copper is particularly visible because it is already a huge business. Designing and building a new multi-billion dollar mine will test the human and financial resources of even a large corporation and its engineering contractors.
Most of the other essential minerals were niche products until recently. For example, while the combined market for copper, nickel, lead and zinc was worth around $ 111 billion last year, all rare earths were valued at only $ 3 billion, lithium at 4. billion dollars and cobalt to 7 billion dollars.
A mad rush of increasing demand, new mines, price hikes and collapses is almost guaranteed and could potentially deter mining investors and low-carbon energy adopters.
Joe Biden’s US administration recognizes the tension at the heart of its green agenda but is unwilling to spend political capital to expand national mining, in the face of opposition from environmentalists and local communities.
Instead, he wants to rely on allies. However, Europe is an even less favorable place to start new mines quickly.
That leaves Brazil, Canada, Australia, and some other predominantly African countries as likely options.
What are the solutions ? Higher prices will certainly result in the exploitation of lower grade or more distant or difficult deposits.
Seabed mining holds great promise but is still in its infancy and can be ecologically damaging to barely known abyssal depths.
There is growing interest in recovering lithium and other minerals from geothermal brines and oil fields in Germany’s Rhine Valley, western Canada, and the Permian Basin in western Texas.
Another potential source that could be of interest in the Gulf is the salt residues remaining from desalination.
Recycling is expected to be stepped up considerably and products such as consumer electronics better designed.
About 95% of the minerals in a smartphone can be recovered, but only 3% are currently recycled properly.
Yet, given the expected huge growth in new energy systems, recycling is only a small part of the solution at this time.
Rare and expensive minerals can be replaced by others, for example copper with aluminum and lithium in batteries with aluminum, sodium or zinc. These alternatives are not currently commercially available or their performance is poor.
It’s a crucial conundrum: how to get the new energetic minerals to save the climate without tearing up landscapes and communities.
Efficient material use and recycling are a factor. Another is for miners to clean up: reduce greenhouse gas emissions and other pollution, limit environmental damage, engage more responsibly with society and avoid corruption.
At the same time, environmentalists should recognize that new mines are essential and not just in remote developing countries.
Squaring this circle requires research and development of new materials, technologies and more sustainable resource extraction.
The ancient copper miners of Magan took advantage of their role to forge a new civilization. The future of green energy offers even greater rewards to those who can responsibly supply its building blocks.
Robin Mills is Managing Director of Qamar Energy and author of The Myth of the Oil Crisis