Demand for metals required for a carbon-free economy will increase by up to several hundred percent over the next two decades, defined by chosen technologies, government policies and investor behaviour requiring a huge supply response from miners, according to new Fitch Ratings report. The ability of miners to cope with the challenge of energy transition will depend on their operational strength, reserve portfolio and prudent capital allocation.
 
An economy that relies on clean energy requires more minerals, such as copper, nickel, cobalt, lithium, aluminium, than one based on hydrocarbons. An average electric vehicle (EV) powered by a nickel, manganese and cobalt (NMC) battery needs 4x more copper and 30x more nickel than an internal combustion engine (ICE) vehicle, and its car body contains 40% more aluminium. One megawatt (MW) of electricity from solar and wind offshore on average need 12x more metals than from coal and gas generation.
 
Fitch expects market deficits to emerge for most energy transition metals after 2025-2030. Tight market balances will support high, longer-term metal prices and miners’ cash flows to provide for future investments. Simultaneously, producers have to deliver increasing volumes of material without compromising ESG standards, such as the reduction of GHG emissions across the metal value chain and the minimising of the environmental impact of mining.
 
Fitch views exposure to energy transition metals in miners’ portfolios as positive for the business profile. BHP and Rio Tinto are reshuffling their portfolios to adjust to the green transition from their current exposure to the traditional economy. Anglo American’s ‘BBB’ rating has a Positive Rating Outlook as the company is better positioned than its peers for the fossil-free economy and has a conservative financial profile. Zijin Mining’s upgrade to ‘BBB-‘ reflects the company's deleveraging after the ramp-up of its major copper and other mine assets in China and overseas, and the benefits of diversifying its exposure to lithium carbonate.