A tumultuous year may have a silver lining. European and US coal consumption has dropped by 34 per cent since 2009, and the International Energy Agency predicts that global coal use will never surpass pre-Covid numbers. In 2020, China’s leader, Xi Jinping, vowed to cut China’s carbon emissions to zero by 2060. Joe Biden has promised that the USA will re-join the Paris Agreement. Nevertheless, while the year of the pandemic may have hastened the transition to clean energy, it has also highlighted a number of vulnerabilities.
Key among them is the fact that phasing out coal and oil in favour of low- or no-emission solutions will come at a high mineral cost. Lithium, cobalt and nickel improve the charging performance and energy production of batteries; copper is essential for transmitting electrical energy through systems; and rare earth metals such as neodymium and dysprosium are used to make powerful magnets that are vital for wind turbines and electric vehicles.
According to the World Bank, around a billion tonnes of minerals such as these will be needed to decarbonise the global energy system by 2050. If the number of electric vehicles reaches the projected 140 million by 2030, the World Bank estimates a 1,000 per cent increase in demand for the minerals required for energy storage. By 2050, demand for metals for solar panels could increase by 150–300 per cent; lithium and cobalt demand, meanwhile, may rise five-fold.
The mineral demands of the clean- energy transition mean that any shortage in supply could have a big impact. Companies that produce solar panels, wind turbines or batteries using imported minerals are at the behest of supply chains that can be affected by regulatory or trade restrictions. Or, as 2020 showed, a pandemic.
According to S&P Global Market Intelligence, hundreds of mines, smelters and refineries closed during the pandemic. In May, the analyst reported disruption to 265 mine sites in 34 countries. Peru’s copper mining activities, for example – responsible for 12 per cent of global supply – were halted at the start of 2020. In May, Peruvian copper mines were operating at 35–40 per cent of capacity, with US$1.89billion of at-risk copper revenue. South Africa’s extended lockdown caused disruption to three quarters of its platinum output – essential for the production of hydrogen fuel cells. Glencore’s cobalt and copper mines in the Democratic Republic of the Congo (DRC) significantly reduced expected yield for 2020.
Indirect Covid-19 impacts have also caused problems, according to economist Timothy Laing, author of the World Bank’s ‘Minerals For Climate Action’ report. ‘Port congestion and logistical issues in Africa, and mines struggling to source replacement components and maintenance may place medium-term drag on supply,’ he says. But perhaps the biggest effect of all, says Laing, will be on the investment landscape. Exploration budgets for new reserves of minerals are likely to fall by 30 per cent compared with 2019. Economists think this could disproportionately affect new mines and new companies in the field.
All of this could be viewed as an opportunity for countries to reassess their reliance on single trade partners. For example, the DRC controls more than 80 per cent of global cobalt production; South Africa 70 per cent of platinum; China around 60 per cent of rare earth metals. China is also responsible for 90 per cent of the processing operations that convert rare earth metals into usable forms for magnets. Of 35 mineral commodities listed as essential to US economic security, China is the top producer or supplier of 23. ‘The lessons [of Covid-19] are two-fold,’ says Laing. ‘First, there are key vulnerabilities in particular supply chains. Second, Covid-19 has helped to highlight reliance on minerals where production is highly concentrated.’
One consequence of production concentration is price volatility. In 2019, the DRC scaled up cobalt production in response to rising demand from China, where 65 per cent of lithium-ion batteries are produced. The rapid influx of supply caused cobalt prices to drop by 40 per cent in just two months, wreaking havoc on the markets.
According to the authors of a recent IEA report, ‘demand [for clean energy minerals] could grow rapidly as the world emerges from the crisis and boosts efforts to accelerate energy transitions.’ A recent report in Nature outlines three options for governments to reduce reliance on single countries for minerals. First, the authors suggest improving access to rare earth metal deposits in other regions, such as Brazil, Vietnam and Australia, in order to reduce China’s market control. However, this isn’t a short term solution: reports suggest that it would take a minimum of 15 years to establish these supply chains.
Second, they suggest that technologies be redesigned in ways that are less reliant on metals produced in single countries. This is inevitable, says Laing. Cobalt, for example, isn’t abundant enough in the Earth’s crust to deliver all the batteries needed for the clean-energy transition. ‘Technological innovation has already occurred in lithium-ion batteries to reduce reliance on cobalt,’ he says.
The third option is to recycle. Worldwide, just 17 per cent of electronic waste is collected and treated. In the EU-28, countries produce around 20.4 kg of e-waste per person annually, according to the Global E-Waste Monitor Report. ‘Selective metal recovery’ could help to build circular economies of the cobalt, lithium and copper used in batteries and electrical goods. But for other materials, including neodymium, commercial recycling isn’t yet operational. The World Bank anticipates that demand for neodymium will increase to more than 350,000 tonnes annually – current total annual production is just 7,000 tonnes.
The pandemic has also highlighted how reliant some developing countries are on mining. Most of the world’s mining-dependent countries struggled to find secondary sources of economic activity when mines and borders were shut down due to the outbreak. Jordy Lee and Morgan Bazilian, researchers at the Colorado School of Mines, wrote in a May Global Policy article: ‘Countries that produce billions in natural resources should not run out of food in a matter of days. Miners who were already working in hazardous conditions should have the ability to feed their families or find alternative work.’
We can only hope that Covid-19, for all its disastrous consequences, may yet provide a wake-up call for both ends of the mineral supply chain.