From AFR 13.10.21 Massive increase in demand for nickel predicted by IMF: Nickel production will need too increase four-fold in next 20 years.
"Net zero will be a bonanza for Australian minerals, says IMF Matthew Cranston and Ronald Mizen Oct 13, 2021
Australia is in pole position to benefit from a six fold increase in demand for so-called “critical minerals” worth $US12.9 trillion ($17.6 trillion) over the next two decades, driven by the race to hit net zero emissions, according to analysis from the International Monetary Fund.
In its latest World Economic Outlook, the Washington-based multilateral lender projects that a steady 15 per cent increase in its metal price index will bolster Australia’s annual economic growth by 1 percentage point, further strengthening the government’s finances.
Glenn Hunt The IMF specifically selects nickel, copper, lithium and cobalt as the top four energy transition metals likely to see surges in prices and production as the world works towards net zero emissions by 2050.
The four minerals are all used as key components in batteries and renewable energies that are crucial in the transition from fossil fuels to low emission electricity. “Prices would reach historical peaks for an unprecedented, sustained period under the net zero by 2050 emissions scenario. The prices of cobalt, lithium, and nickel would rise several hundred per cent from 2020 levels,” the report said.
“Under the net zero by 2050 emissions scenario, the demand boom would lead to a six fold increase in the value of metal production – totaling $US12.9 trillion over the next two decades for the four energy transition metals.
”According to forecasting contained in the IMF report, copper production would need to double under a global push towards net zero by 2050, while nickel production would need to increase almost fourfold. Both lithium and cobalt production would need to lift about six fold above current levels.
High policy uncertainty may hinder mining investment and increase the chances high metal prices will derail or delay the energy transition. Warning in IMF World Economic Outlook report despite bright prospects for the four metals.
The modelling from the International Energy Agency is based on a global push towards 2050, which the IEA indicates requires more than the current “insufficient action” scenario that assumes a more gradual approach.
The net zero scenario implies the growth in metal demand would initially be very high between now and 2030, and slow down over time because the switch from fossil fuels to renewables requires large initial investments.
“The supply of metals is quite concentrated, implying that a few top producers may stand to benefit,” the IMF said.
Australia already has among the top three global reserves for each of the four critical minerals, leaving the country in a prime position to benefit from the new electricity storage and generation shift.
“Countries that stand out in production and reserves include Australia [for lithium, cobalt, and nickel]. The economic benefits of higher prices for metal exporters could be substantial,” the IMF said.
The body did warn, however, there was a high degree of uncertainty around trying to predict demand scenarios and, along with pace of technological change, policy uncertainty was the biggest threat to the forecasts.
critical minerals list a boon for Australian miners. In noted that producers were likely to be price setters, not price takers, given how long it takes to gain approvals and set up a new mine. “Supply is quite inelastic over the short term, but more elastic over the long term. A demand-induced positive price shock of 10 per cent increases the same-year output of copper by 3.5 per cent, nickel 7.1 per cent, cobalt 3.2 per cent, and lithium 16.9 per cent.
”Supply elasticities summarise how fast firms raise output in reaction to a price increase.“After 20 years, the same price shock raises the output of copper by 7.5 per cent, nickel 13.0 per cent, cobalt 8.6 per cent, and lithium 25.5 per cent.
”Last month, leaders of the so-called Quad group of countries formally agreed to map out supply chains for critical minerals, as well as draw up regulations to speed up the approval and development of projects and of supply agreements.
The IMF said several policy areas needed to be co-ordinated globally to ensure prices for such minerals did not get too far out of control and hamper the transition to net zero.
“A credible, globally co-ordinated climate policy; high environmental, social, labor, and governance standards; and reduced trade barriers and export restrictions would allow markets to operate efficiently, directing investment to sufficiently expand metal supply – thus avoiding unnecessarily increasing the cost of low-carbon technologies and supporting the clean energy transition.” "
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