Nickel and copper have brightest demand outlooks - Fitch

Metals and mining companies will face varying impacts from the transition to a low-carbon economy, including diverging demand trends and the need to transform production processes and switch to greener energy sources and cleaner feedstock, according to a Fitch Ratings report which assessed long-term climate vulnerability scores.

Nickel and copper have the brightest demand outlooks due to their use in green economy infrastructure, such as solar panels, wind turbines, electric vehicles and grids, although producers will need to reduce the carbon footprint of their operations.

"We expect demand for nickel to surge at the highest rate, by 5x by 2050 compared with 2020," it states.

"Major demand drivers are linked to rechargeable battery applications for EVs and electricity storage, which will be responsible for almost all additional nickel demand over time. We expect the application of nickel in stainless steel to berelatively stable, linked to low-single-digit growth rates in steel production."

Aluminium is also required for the green transition, with demand spurred from the roll-out of EVs, which contain more aluminium than ICE vehicles, renewable power generation and recyclable packaging, although Fitch expects it to have moderate demand growth, with producers facing pressure from rising carbon costs, and demand for zinc is expected to be supported by its wide use in construction and steel galvanisation (the latter used for wind turbines).

Fitch does not expect the energy transition to materially change demand for gold as it is viewed as a financial asset and used in jewellery. Mining of non-ferrous metals is responsible for almost 1% of global greenhouse gas emissions, much lower than steelmaking (7%).

The key challenge for steelmakers’ decarbonisation will relate to the technological shift, with multiple options being developed.

"At the same time, steel is an essential material for building the green economy," it notes.

"We expect that steelmakers will transit to the electric arc furnace route, which does not require coking coal but will continue to use iron ore. Producers relying on the blast furnace-basic oxygen furnace route will be subject to the highest risks. Thermal coal will be gradually phased out and faces a long-term existential threat."

Demand for coal should fall by around 30% in 2040 (compared to 2030)and by 2050 it should amount to around half of peak coal demand in 2030.