The metal and mining industry is at a crossroads, facing a surge in demand driven by the burgeoning electric vehicle market and the global shift towards renewable energy. A recent McKinsey report highlights the dramatic changes shaping this sector, revealing both exciting opportunities and pressing challenges.
While traditional materials like steel and thermal coal continue to dominate the market, accounting for 60-70% of the industry’s revenue, a new wave of metals is rising to prominence. The electric vehicle (EV) boom, coupled with the demand for battery storage, has fueled a rapid expansion in the production of lithium and nickel. Investments from Australia, the US, and China have driven lithium production beyond initial expectations, while Indonesia’s nickel output has been boosted by the implementation of high-pressure acid leach technology.
However, the critical role of copper in the energy transition cannot be ignored. This metal is essential for electrical infrastructure and renewable energy technologies, but it is struggling to keep up with the burgeoning demand. Declining production from existing mines and delays in new projects have exacerbated this lag, threatening to create a supply-demand imbalance. McKinsey warns that copper prices need to rise by 20% to incentivize sufficient investment in new mining projects and avoid significant delays in critical infrastructure development, such as electrical grids and renewable energy installations.
The report also sheds light on the increasing demand for rare earth elements, essential for technologies like wind turbines and electric vehicles. Although their market size is estimated to be relatively small – under $20 billion – these elements are crucial for magnets and other high-tech components.
To meet the rising demand by 2035, the metal and mining industry faces a massive investment requirement: a staggering $5.4 trillion. This investment is crucial not only for scaling production but also for decarbonizing the sector itself. Infrastructure development, skilled labor, and water availability will be critical factors in ensuring that the supply chain can keep pace with the surging demand. The projected investment would create 270 gigawatts (GW) of power and approximately 340,000 new jobs globally. While this job creation is positive, McKinsey cautions that a slow phaseout of thermal coal could put 1.25 million jobs at risk.
Despite the challenges, the industry’s financial outlook remains strong. Revenues grew by around $2.4 trillion between 2020 and 2023, EBITDA nearly doubled from $500 billion to $900 billion, and balance sheets remain robust, with net debt over EBITDA at 1.3x – well below the through-cycle average of 1.8x.
The metal and mining industry is at a pivotal juncture. Balancing the needs of the energy transition with responsible resource management and job security will be critical to navigating the opportunities and challenges ahead.
