Will ‘green metals’ become Africa’s new oil?

By Conrad Onyango – bird Newsroom

As the world makes a historic pivot toward curbing carbon emissions, Africa’s major industrial metals-producing countries will look to rake in billions on a projected price surge.

Analysts now see the development of green electricity grids, electric vehicles and battery storage industries creating fresh demand for four industrial metals: copper, nickel, cobalt and lithium.

“A resulting surge in prices for materials such as cobalt and nickel would bring boom times to some economies that are the biggest exporters,” said the IMF in its latest analysis.

“The Democratic Republic of the Congo, for example, accounts for about 70% of global cobalt output and half of reserves. Other standouts include Australia, for its lithium, cobalt, and nickel; Chile, for copper and lithium; along with Peru, Russia, Indonesia and South Africa,” the report, which highlighted the dangers that rising prices could bring to efforts to curb greenhouse gases, said.

According to Statista, the DRC’s cobalt production was estimated at 100,000 metric tonnes while copper production stood at 1.5 million metric tonnes in 2019.

Nickel production in Madagascar is estimated to reach 9,900 metric tonnes in 2020 as lithium production in Zimbabwe soars to 65,000 metric tonnes in 2021. Botswana and Zimbabwe also have nickel resources. Many of Africa’s resources remain untapped, even unexplored.

Under a net-zero emissions scenario, the IMF says the booming demand for the four energy transition metals alone would boost their production value six-fold to $12.9trn, over two decades.

“This could rival the roughly estimated value of oil production in a net-zero scenario over that period. The four metals could affect the economy via inflation, trade and output, and provide significant windfalls to commodity producers,” explained the IMF in the report.

Prices of cobalt, lithium, and nickel are seen rising ‘several hundred per cent’ from 2020 levels and peak around 2030. A less steep rise is expected for copper.

S&P Global Market Intelligence projects in a report, ‘The Big Picture: 2022 Metals and Mining Industry Outlook’, published in October, that energy transition and global economic growth will drive exploration budgets in 2022 to between five and fifteen per cent above 2021.

“High interest in energy transition metals should push copper and nickel up more than the average and maintain interest in lithium and cobalt exploration,” said Kevin Murphy, principal analyst, S&P Global Market Intelligence.

The International Energy Agency has also affirmed total mineral demand from clean energy technologies looks set to rise significantly by 2040.

According to IEA, electric vehicles and battery storage will account for about half of the mineral demand growth from clean energy technologies over the next two decades – spurred by surging demand for battery materials.

The surge in the price of metals like copper and nickel, above pre-pandemic levels, is helping many smaller countries rebound from the shackles of the pandemic faster than expected, global financial institutions like the World Bank and IMF have shown.

In its metal price Index, IMF projects a persistent ten per cent rise in metal prices, which translates to an extra two-thirds of a percentage point to the pace of economic growth experienced by metals-exporting countries relative to importing ones.

“Exporters also would see a similar magnitude of improvement for government fiscal balances from royalties or tax revenues,” say IMF analysts.

While that picture may be rosy for the producers, however, the IMF warns that the rising costs could derail or delay the energy transition. The IMF report can be found here.

bird story agency