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Metal producers will need to double capex to meet net zero by 2050: BofA

Highlights

Almost another $100 bil capex required

Metal demand to tackle climate change set to grow exponentially

Focus been on ESG, emission, not on capex, production

Metal producers will need to double capital expenditure in the coming years to ensure there are enough resources available to meet demand coming from decarbonization and the global aim to reach net zero emissions by 2050, Bank of America metals strategist Michael Windmer said Nov. 30.

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He told the virtual BofA Global Research Metals 2022 Outlook media roundtable that even though the global economy might slow down in 2022, metal demand growth was expected to hold up much better than in previous business cycles.

"Tackling climate change has implications for metals and we potentially see big investments coming through. Companies are spending money on renewables, energy storage and the [energy] transition, so the core of what we need is on the metals side," Windmer said.

He said that, across the whole value chain, the compound annual growth rates of a number of metals required in applications to tackle climate change to 2050 were strong going forward.

For lithium, total demand was expected to reach 3.1 million mt by 2030 and 5.4 million mt by 2050, with CAGRs of 24.7% and 9.4%, respectively, which compared to supply of 386,947 mt in 2020.

Similarly, for cobalt, the CAGR for 2030 was forecast to be 18% to 607,720 mt and 7.3% in 2050 to 1 million mt, up from total supply of 142,883 mt in 2020.

"We need to react to that and one of the concerns we have or the reality in the mining industry is that operators need to make sure they don't run out of resources over the coming years," Windmer said.

He said that miners had clearly been concerned about environmental, social and corporate governance, credentials and emissions, but this meant that increasing capex and production had taken a backseat.

"When you're looking at the last 10 years, I would argue tackling climate change has made a relatively limited contribution to demand and demand growth for mined commodities and didn't really feature that much in the investment strategies. In the last decade or so, the steady state capex of the miners was around $80 billion annually," Windmer said.

"When you're looking at the demand growth rates of the mined commodities, if the world wants to get to net zero, we require almost another $100 billion in capex to make sure we don't run out of raw material effectively going forward," he added.

Raw material demand awareness

Windmer said that while there had been global awareness on tackling climate change and reducing emissions and global warming, there was limited focus on the raw materials that were required and this was a global discussion that needed to pick up in earnest.

However, he said it was becoming a bit more of a mainstream view that metals demand would benefit from decarbonization and that there would be a more immediate impact, rather than another decade before demand increased.

"The equation there is relatively simple, if you do want to take fossil fuels out of the global economy, but at the same time want to maintain a modern lifestyle, you need to put something back in and that is where the mined commodities come back into their own. You need mined commodities in the entire new ecosystem that you're building on the renewables side, on the energy storage side and on the consumption side where it comes to EVs," Windmer told the roundtable.

He added that while there had also been a lot of focus on recycling, which was a potential way to combat immediate raw material bottlenecks, ultimately more investment was required on the supply side to ensure stronger metals demand in the coming decade is met on a global basis.

"Climate change will have an increasing impact on the mined commodities. Clearly the harder the global community pushes towards reducing global warming, the higher that metals demand effectively will get. That is a discussion that, in my view, will be more actively led next year and is something we have to follow quite closely," Windmer said.