What does the energy transition mean for metals?
Zachary Skidmore speaks to Warren Patterson, ING’s head of commodities strategy, about the implications of ING’s report on energy transition metals and the growth of metals demand in a decarbonised society.
emand for metals is expected to skyrocket in the next five to 10 years. The growth of green transport and infrastructure will demand increasing amounts of metals, especially lithium, copper, and cobalt.
The recently-released ING report, ‘Energy transition: Metals demand set to take off’, provides a scenario-based analysis on what the energy transition will mean for metals demand. In a series of articles, it proposes three scenarios on specific metals demand in the road transport and power sectors, as well an analysis of how the mining sector can decarbonise supporting the energy transition. We speak with Warren Patterson, ING’s head of commodities strategy and one of the authors of the report, about its implications.
//Warren Patterson ING's Head of commodities strategy.
Zachary Skidmore: How can governments best support innovation and decarbonisation within the metal sector?
Warren Patterson: The wide implementation of carbon taxes [can best support innovation and decarbonisation]. If we look at the emission trading system in Europe, it took several years for it to really kick off and it’s been only the last five years where it's actually had a meaningful impact in terms of high carbon prices, pushing the industry to cut emissions. So, that's the route you would have to go.
If we look to China, they recently launched their own carbon trading system. For now, it only includes the power sector but in the longer term, they're going to start including the metals industry. So, from that, there'll be a lot of more pressure on producers in China to reduce their emissions and reduce their energy intensity, which will obviously lead to lower emissions.
Can a technology over tax approach work in driving decarbonisation?
If you haven't got the incentive to make that switch it’s a little bit more difficult to do it. So that's why I don't think you can look at them separately, they’ve got to go hand in hand.
You can have plenty of technology advances but if you haven't got the government policy there to be the firestarter for that, I find it quite difficult to see it succeed. So, I think you must have a balance between the two and that's why we've gone with scenario analysis in this report.
Our most bullish outlook for demand is plenty of government policy, as well as a lot of innovation from the private sector. So, I think it's certainly something that goes hand in hand. It's a little bit more difficult if it's just the one part of it or the private sector or government pushing; it's got to be a joint effort.
// 3D System Model and Completed Installation. Credit: Deimos
How critical is the upscaling of recycling efforts in reducing the pressure on mined metals in the green transition?
Recycling will play a crucial role for two reasons. Firstly, it will help reduce emissions for the sector. For instance, if we look at the aluminium sector, primary emissions are close to 15 tonnes of CO2 per tonne of aluminium produced. If you look at recycled aluminium, it's below a tonne. There are clear advantages from doing that.
In aluminium, we have pretty high recycling rates already. However, if we look at cobalt and lithium, the recycling rates there are significantly lower. So that will play a key role not just in helping reduce emissions, but also in ensuring adequate supply in the longer-term rates. We will obviously have to see significant investment on the mining side but if you can help offset that with increased recycling, that's going to certainly help the industry.
// Main image: 3D System Model and Completed Installation. Credit: Deimos
How far away are we from ‘green’ aluminium, nickel and copper across the supply chain?
We have a few producers who already have thrown around that they have green aluminum or low-carbon aluminium. You're seeing parts of this already, but true green aluminium, and decarbonised steel, is probably something you will see at a commercial scale five to 10 years from now.
We've seen a lot of sort of prototype projects coming online, for instance, the steel produced from hydrogen in Sweden, but scale up will take some time. Another factor will be: when does green hydrogen also become cost competitive as a fuel source? I would say in the latter part of this decade.
// Main image: 3D System Model and Completed Installation. Credit: Deimos
How does innovation in battery technology make it more difficult to model battery metals' demand over the longer term?
The issue at the moment is that we have so many different battery chemistries. Depending on the region where the battery is produced, they will use a different chemistry. For example, in China, lithium iron phosphate batteries (LFP) are a lot more commonly used. Elsewhere, it’s lithium-manganese-cobalt-oxide batteries (NMC).
The general view is that, over time, we will see more NMC batteries used widely across the industry for electric vehicles. Whereas, for stationary storage, you probably see an increased usage of LFPs, as energy density is not as big of an issue for stationary storage. Those are the two big trends we'll see for lithium-ion batteries.
However, technology advances could mean that we shift completely away from those. We have seen the prospect of sodium-ion batteries coming to commercial scale. That makes it a little bit more difficult to forecast the demand outlook for these specific metals, given that the battery sector is developing at a very good pace and technology might mean their price will fall quickly, which could induce change pretty quickly.
With the majority of cobalt coming from areas of tougher jurisdictions, how can the electric vehicle sector ensure its supply of cobalt is not disrupted by political and or social strife?
Reducing the amount of cobalt they use in the batteries is the key and that's what we're seeing, producers are trying to minimise the usage of cobalt in batteries.
I think in general, for commodities, the most important thing is having a good framework in place for traceability. That's going to be what we are going to need to see with cobalt, especially if we're going to depend largely on cobalt from the Democratic Republic of the Congo.
I think, realistically, technology advances and the desire of battery manufacturers to minimise the usage of cobalt means that as we go ahead, less and less cobalt will be used in batteries.
Has excessive information from varied sources on climate reporting helped or hindered the drive towards achieving net-zero?
It’s helpful in theory, but in practice it’s just basically a huge amount of data thrown at people, and different ways of reporting it. Also, not all that data is freely accessible.
I'd say to a certain extent, there needs to be more standardisation, in terms of reporting. I think it would be obviously a lot more useful to the industry and I think we need to sort of get to a standardised sort of way of reporting to be significantly helpful to the industry.
// Main image: Chonburi, Thailand: Craftsman welding steel structure h-beam in fabrication factory. Credit: Salazar Benjamin / Shutterstock.com