Decarbonization can't happen without more investment in mining projects: Indaba Panel

The metals industry has failed to address the impending undersupply of critical minerals arising from the global energy transition, according to speakers at the Investing in Africa Mining Indaba in Cape Town on Feb. 7.

Panelists on the "COP27 Outcomes and Green Metals – demand boost, supply-side crunches and the way forward" panel spoke of the poor investment in global mining capacity that had left the world facing a significant shortage of critical metals, including lithium, cobalt, nickel, graphite and copper.

"The metals industry has failed to rise to the challenge brought on by the global energy transition and we now are heading towards a global undersupply," Techmet CEO Brain Menell said, adding that many countries were reliant on a handful of small, underfunded projects.

"Thank goodness for China building capacity and supply chains, otherwise we would be in a far more serious situation," he said.

"OEMS are starting to panic at the realization that they are going to have to deploy equity to satisfy their metals requirements," Menell said, adding that "the shortage of metals has massive implications for manufacturing output, jobs, inflation and the energy transition."

In order to mitigate the crisis, Menell called for greater government involvement.

"Governments need to subsidize the flow of capital" he said, adding that "we need the US and other rich governments to incentivize investors to deploy capital in Africa to support the establishment of mining projects and associated infrastructure."

Bushveld CEO Fortune Mojapelo agreed, saying: "Over the past four decades most mining companies have been reactive to mineral demand as opposed to creating demand."

He added that "one cannot ignore geopolitics" with the global powers suddenly realizing they need to develop supply chains for these critical materials.

The US wants to strengthen its domestic mining and processing capacity fast, while China is rapidly building out its stationary storage supply chains, Mojapelo said, adding that Africa needed to leverage its position to build economic growth.

Disconnect between demand and capital invested

Wood Mackenzie Vice President of Metals and Mining Markets Nick Pickens said there was a significant disconnect between the material demand of the energy transition and the capital invested in mining projects.

"There is an obvious shortage of mining projects and for many markets the pool of metal is not sufficient enough, he said. "Recycling is part of the solution but still needs investment in projects."

BMO Capital Markets Managing Director of Commodities Research Colin Hamilton said the energy transition would cause markets for critical metals to become supply-constrained, with end-users forced to compromise by reducing the metal intensity within their products, such as the manufacture of smaller batteries.

"The cost of risk must take into account risk of not taking risk when considering the development of new mining projects," he said.

Platts, part of S&P Global Commodity Insights, assessed seaborne lithium carbonate and lithium hydroxide at $70,000/mt CIF North Asia and $77,800/mt CIF North Asia Feb. 8, up 107% and 145%, respectively, since the start of 2022.