IMF: Future metals demand may top supply

Current production of graphite, cobalt, vanadium, and nickel is not enough for energy transition.
IMF: Future metals demand may top supply IMF: Future metals demand may top supply IMF: Future metals demand may top supply IMF: Future metals demand may top supply IMF: Future metals demand may top supply

A growing demand for renewable energy may run into metal supply problems.

Future metal demand from the coming energy transition may be more than current global supplies can provide, the International Monetary Fund (IMF) said in a blog on Dec. 8.

The energy transition, including the shift to electric vehicles, greater electrification and use of renewable energies, might require as much as 3 billion tons in metals, the IMF said.

Replacing fossil fuels with renewable energies would require investments in green energy to increase eight-fold.

However, mine development and production are on much longer timelines, and may not be able to provide the necessary metals in time, the IMF said.

"The first question is how far current metals production is stretched and whether existing reserves can provide for the energy transition," the IMF said. Considering the push to net zero by 2050, current production of graphite, cobalt, vanadium, and nickel is not enough, and supply will have a two-thirds gap compared to demand.

The same is also true for copper, lithium, and platinum supplies, which will have a 30% to 40% gap versus demand.

Metal mining companies can improve supply by scaling up production by investing in innovation in extraction technologies, as well as investing in metals recycling.

Given how metals tend to be concentrated in small areas, the coming metals boom will likely benefit a few producers disproportionately, the IMF said.

The transition to low-carbon energy may also result in supply bottlenecks if investment does not keep up with demand. These bottlenecks are likely to happen in countries with concentrations of certain critical minerals, such as the Democratic Republic of the Congo, China, Chile, and South Africa.

Financing of mineral projects could also be difficult, as investors are driven by ESG considerations. Some mining companies may struggle to meet these guidelines and miss out on financing as a result, the IMF said.

However, the mining companies who have made progress on these guidelines will be able to increase their access to debt and equity financing, the IMF said.