Rising demand for raw materials meets lengthy permitting processes and environmental concerns.
Several raw materials important for the energy transition, including lithium and cobalt, will face a supply deficit in the coming years, according to S&P Global Market Intelligence. However, rising demand is meeting resistance to new mining projects among the population. A circumstance in which the industry is not innocent, as little consideration has long been given to people and the environment, S&P cites a study by the Colorado School of Mines. The list of projects put on hold due to environmental concerns is growing. From the U.S. to Greenland to Spain and Sweden. In addition, the lengthy regulatory approval processes for new projects take seven to ten years in the U.S., significantly more time than in Australia or Canada, for example, according to the study. The time-consuming processes also dampened the initial euphoria over the discovery of a substantial rare earth deposit in Europe, namely Sweden, where it is also expected to take up to 15 years before extraction can begin. Possibly too late to make a decisive contribution to the fight against climate change or to make Europe less dependent on the quasi-monopolist China. Moreover, mining alone is insufficient because further processing is even more concentrated in favor of the People’s Republic.
While the industry heavily depends on political decisions, S&P Global sees another home-grown problem: insufficient funding. Exploration, i.e., the search for raw material deposits, would suffer from this. The number of wells required for this purpose has declined in recent months. Instead of reinvesting in their own business, companies would instead prioritize the interests of shareholders, for example, by paying dividends, Mitchell Krebs, CEO of precious metals producer Coeur Mining, is quoted as saying. A few months ago, Mike Henry, CEO of the mining group BHP, explained how enormous the investment requirement is to achieve the climate targets: an additional 100 billion U.S. dollars annually.
Photo: iStock/ArtEvent ET