Deloitte’s report, Tracking the trends 2018: The top 10 issues shaping mining in the year ahead, ended with a section on the commodities of the future. Choosing which commodities to invest in and which to divest is an important challenge for mining decision-makers, especially as industrial needs change and environmental concerns come to the fore. Deloitte, therefore, presented its predictions, taking into account technological developments.
“Given how inextricably socioeconomic trends link to commodity demand, mining executives have long had to double as futurists,” says the Deloitte report. “To assess which commodities to invest in, and which to divest, miners need to keep their fingers on the pulse of fluctuating consumer demands, global demographic and economic shifts, and the effects of environmental change.”
As such, it is unsurprising that a great number of commodities on Deloitte’s watch list are those used in the production of lithium-ion batteries. Around the world, the drive to reduce carbon emission in order to tackle climate change has led to increased electrification in many sectors. Battery technology has become hugely important and the production of batteries has increased dramatically. Tesla alone is expecting to produce 35GWh of batteries this year, which would have been enough to cover the entire global demand just four years ago.
The growth of batteries and electrification seems certain, but what of other influences? For example, many are pursuing asteroid mining, which, should it prove doable, would be exceptionally disruptive for the commodities market.
What does Deloitte list as the commodities of the future?
Potentially the most publicised commodity of the future is lithium, the key component of Li-ion batteries. Global demand is now predicted to double or even triple by 2030, and new mining projects are seeking to take advantage of the bullish market.
“Although supply of lithium is growing in both Western Australian and Canada, 70 percent of the world’s known lithium reserves are in Argentina, Bolivia and Chile, the so-called lithium triangle,” explains the Deloitte report. “While a number of companies are focused on that region, several lithium projects have faced delays due to technical problems, while lead times for new capacity can be four to five years. This environment has created a very positive dynamic for lithium prices, which rose by over 70 percent between November 2016 and November 2017.”
Lithium is far from the only commodity benefiting from the burgeoning interest in battery technology. Graphite, used as anodes in batteries, has also seen an increase in interest.
In 2017 alone, synthetic graphite electrodes saw a nine-fold increase in price, rising from $1,748/t in January to $16,309/t in September. Synthetic graphite accounts for more than 60% of the world’s consumption, with natural graphite making up the rest and also seeing growth in value and demand.
A greater degree of uncertainty surrounds graphite, however, predominantly due to China’s dominance as an importer. While in 2016, China supplied just under 60% of the world’s graphite, this may shift due to changes in environmental regulations along with rising costs of production.
Since 2016, cobalt prices have quadrupled, creating a global supply deficit. As much as 95% of cobalt is produced as a by-product, thus it is disproportionately affected by demand for other minerals. As copper and nickel markets have struggled in recent years, so too has the supply of the increasingly desirable cobalt. This year, this deficit stands at 885t but could increase to 5,340t by 2020.
The supply of cobalt is complicated by the Democratic Republic of Congo’s (DRC) prevalence over its extraction. The DRC accounts for 70% of global supply and there are few dedicated producers. Recent market disruption in the DRC is likely to have affected the supply of copper and cobalt, further driving up the price. However, new legislation has listed cobalt as a strategic metal in the hope of stabilising the market and ensuring the country benefits from this booming resource.
The price of nickel sulphides hit a three-year high in April, reaching $16,690 per metric tonne. This is mostly due to the large quantities required for EV batteries. Only high-grade nickel can be used in EVs, where it helps to keep the charge over long distances, but only around half of the world’s supply of nickel is of the right grade for such use.
“While nickel laterites (nickel pig iron and ferronickel) make up the majority of today’s production and will likely remain in oversupply, demand for nickel sulphides (battery-grade nickel) is expected to increase 50 percent to three million metric tonnes by 2030,” says the Deloitte report.
An average electric car battery pack uses 40kg of nickel currently, but some predict this percentage will increase. North America Nickel predicts the percent in car batteries could rise to as high as 80%, compared with 33% today.
Copper bares many similarities to nickel both having struggled in recent years, but as the demand for electrification increases so too does the demand for copper wiring. Nearly 28 million tonnes (Mt) of copper is used annually, 75% of which for wiring. This amount is set to grow following its current trajectory. Since 2016, copper prices have risen by 38%.
EVs contain four times as much copper as traditional, combustion engines while renewables such as photovoltaics are five times more copper-intensive than conventional power generation from thermal plants and nuclear. The increase in demand for EVs alone is expected to drive the market into a deficit of 120,000t by the end of this year.
The rise of renewables is responsible for many commodities experiencing growth, but conversely there are those that are set to suffer. Coal is undoubtedly one as, despite its continued importance in many countries’ fuel mixes, climate pledges are ensuring that fewer plants will be built and demand will dwindle.
“Thermal coal is an often cited example as countries around the world inexorably move towards renewable energy sources,” says the Deloitte report. “Over 160 countries and counting have publicly announced commitments to increase the share of renewables in their electricity mix, with 59 countries planning to shift to 100 percent renewable energy in the coming decades.”
As the world turns its back on this fossil fuel, coal is most likely to become a commodity of the past.
Recycling is a disruptive factor in many commodities’ futures, such as iron ore. Due to its strength, steel is widely used and demand remains strong. By 2030 it is estimated that 1.9 billion metric tonnes of steel will be needed to meet global demand. But as recycling initiatives ramp up around the world, iron ore, one of the main components of steel, demand is dwindling.
“Already, the US produces over 70 percent of its steel from scrap metal, reducing demand for iron ore,” say the Deloitte report. “Conversely, China only produces 11 percent of its steel from scrap. As that rate picks up, the risk to iron ore is bound to rise.”
This is risk already becoming apparent; in 2016, China recycled 143Mt of scrap steel, which in 2020 is to increase to 200Mt.