These days, we so often hear the term “Energy Transition” bandied around with accompanying rhetoric from all angles on what it means for this and that. It has quickly become the proverbial theme for the global resources sector as the primary industry essential to deliver the “Critical Minerals” needed to achieve what some may consider as ambitious targets. But are they just buzz words? A closer look suggests that’s not the case.
Firstly, ESG considerations have become central to global policy and corporate strategies, reflecting a commitment to sustainable and ethical practices. This has led to an increased focus on the published “Critical Minerals” lists for countries that are based on their economic priorities, industrial needs, and supply chain vulnerabilities. Many of these minerals we know well, have invested in or, at very least, have heard of before. Others though are far more obscure for the average investor, creating speculative tailwinds in the least expected of minerals.
Further, global leaders have signed various accords such as the Paris Agreement (2015) and the Glasgow Climate Pact (2021), publicly committing to goals and timeframes for various objectives.
For example, many governments worldwide established targets to phase out the sale of new internal combustion engine (ICE) vehicles, aiming to accelerate the transition to electric vehicles (EVs) and reduce greenhouse gas emissions. Many of these targets were set for 2030 (2035 for Australia), which isn’t that far away from our 2025 vantage point.
Even worse for the auto manufacturers with ambitious EV production targets by 2025 (err…this year!) that have sunk substantial amounts of capital into EV manufacturing facilities and securing supply of raw material for batteries.
As we continue hurtling towards the mid-century, how realistic these goals are will only become more visible. However, the backdrop of government policies and corporate strategies are facilitating a fundamental drive towards “Critical Minerals” based products and therefore an increase in demand for the key inputs.
Interestingly, a recent Benchmark Intelligence infographic illustrated that a staggering 293 new mines or plants are required across nine minerals by 2030 in order to meet forecast global battery demand.
If that headline number isn’t staggering enough, High-Purity Manganese Sulphate Monohydrate is estimated to require 21 new plants to achieve a 354% increase in supply, albeit a market coming off a very low base.
Conversely, the much larger – and less of a mouthful – Copper market requires 61 new mines for a 16% increase. Notable mentions also go to Natural Graphite with 31 new mines for a 142% supply increase and Lithium with 52 new mines for a 125% supply increase.
While these estimates are all a bit of arm waving, they are only for minerals required to meet battery demand let alone other “Critical Minerals” under the category of “Energy Transition”. Further, it certainly hasn’t considered permitting, funding, disruptions of existing supply, geopolitical market dominance, ebbs and flows of battery demand or any other possibilities for delay.
Like the Manganese market, many of the Critical Minerals are very small global markets or developing/growing, which are typically more volatile. The prices of these can move more wildly like we have already seen with the up and down of Lithium plus the rise (so far) of Antimony and Gallium.
We are already well down the “Energy Transition” path with a strong global backdrop of government policy and corporate strategy leaning heavily into the thematic. For investing tailwinds, it’s most often wise to follow the capital, and the significant investments in manufacturing and market positioning already committed globally are unlikely to be reversed anytime soon.
While it won’t be smooth sailing all the time, as we have already experienced in the EV and lithium sectors, the undertow in motion clearly has a longer view. If the Benchmark Intelligence infographic estimates are even half right, there is a lot more of this story to play out. Will ambitious targets be achieved, pushed back or re-cut altogether?
One thing is certain, whether it’s the established bellwethers of global markets like Copper, a smaller yet growing market like lithium or something more obscure such as Hafnium – whatever that is – the terms “Energy Transition” and “Critical Minerals” apply to them all.
