Rio Tinto says the transition isn’t happening fast enough, but will drive huge demand for minerals
The push to re-industrialise Western economies and the transition to net zero will provide strong tailwinds for the mining sector for decades to come, both Rio Tinto and BHP believe.
The push for Western economies to re-industrialise combined with the enormous minerals demands from the transition to net zero will provide strong tailwinds for the mining sector for decades to come, both Rio Tinto and BHP believe.
Rio chief executive Jakob Stausholm, speaking at the London Metals Exchange (LME) on Monday UK time, said “the energy transition is at the heart of Rio Tinto’s strategy’’, while reindustrialisation and an increase in both supply and demand from the Global South were the large themes shaping the minerals industry over the longer term.
Meanwhile BHP, in an insights document released this week, said it believes global copper demand will grow by about 70 per cent out to 2050 to more than 50 million tonnes per year.
BHP said while the copper growth rate had slowed over the 15 years to 2021 to 1.9 per cent per year, from a long run average over 75 years of 3.1 per cent, it expected this to bounce back to 2.6 per cent.
“We believe this reversal will come from a combination of three key themes: ‘traditional’ economic growth, and the newer themes of the ‘energy transition’ and ‘digital’ (primarily data centres),’’ BHP said.
“Traditional demand in the developed world is expected to remain strong and as living standards rise globally, the demand for copper is expected to follow suit.
“Take China for example, despite its enormous appetite for copper over the past two decades, it still only has half of the copper accumulated stock-in-use per capita (e.g. buildings, machinery, vehicles) compared to a developed economy, at around 100 kilograms per capita.
“India, the other major economy with over one billion people, also has a compelling copper story.
BHP said India’s electricity consumption per capita was currently about one-seventh of Japan’s and one-fifth of China’s, “and we expect its copper demand to grow five-fold over its pre-Covid volumes in the coming decades as electricity is made more accessible’’.
Mr Stausholm told the LME that the pandemic had exposed weaknesses in Western industrial economies, which were being addressed by policies such as the US Inflation Reduction Act (IRA), in a bid to bring more manufacturing onshore.
“However, it is still unclear whether Western economies are succeeding in their mission to bring blue-collar work back to where the consumer is,’’ Mr Stausholm said.
“While it’s still too early to tell what the outcome of policies like the IRA will be, we haven’t yet seen any significant increase in output.
“There is currently not enough evidence to suggest Western reindustrialisation has taken hold.’’
Mr Stausholm said while there had been a surge in manufacturing construction spending in the US, most of this investment since 2022 had been concentrated in semiconductors.
“Meanwhile, the reality is that China - and increasingly other Asian economies - are continuing to strengthen their competitive position and outpace the rest of the world,’’ he said.
“The upshot is there is still plenty of demand to be unlocked from reindustrialisation. Not least if Western countries can learn from China’s example of replication at scale, delivery at speed, and a tightly integrated supply chain with supporting infrastructure.’’
Mr Stausholm said on the net zero transition, that “it is clear the world is simply not moving fast enough’’, and fundamentally, the transition was about electrification.
“It is a very physical transition,’’ he said.
“It means building the infrastructure for renewable energy, building electric vehicles and rapidly expanding transition lines.
“Essentially it means a lot more demand for our materials: copper, aluminium, battery materials like lithium, even high-grade iron ore for green steel.
“If the whole world was pushing harder to fight climate change, there would be much more demand for our materials.
“Still, the transition is starting to happen - we just do not know how quick it will be. Once the world does hit its stride to achieve its net zero targets, we are confident we will see even greater demand.’’
BHP also said electrification was at the core of the transition, saying under its base case forecasts, electricity demand would roughly double from today to 2050.
This would drive a large increase in the use of copper across electric vehicles, but also in smart grids, LED lighting and heat pumps.
On the data centre front it said it demand from that sector was expected to increase six-fold by 2050.
“What is unique about the next 25 years is the way copper demand from electrification, decarbonisation and digitisation will cut across high, middle and lower-income economies alike,’’ BHP said.
“Unlike the 20th century, where the adoption of cars, electricity, consumer electronics and white goods occurred at different times across various regions, we expect to see more-or-less concurrent adoption of the copper-intensive technologies of EVs, renewables and data centres around the world.’’
In absolute terms, BHP said under its forecasts copper demand would grow by about one million tonnes per year every year until 2035, which was double the growth rate over the past 15 years.
Both companies also said there needed to be more focus on recycling existing minerals, which was made more difficult by the complexity of some modern manufactured goods.
Mr Stausholm said it had also been traditionally cheaper to source primary metals, but scrap would likely play a greater role in the future.
“However, it is clear the recycling industry urgently needs to turn a corner with localised scrap collection and processing,’’ he said.
“This can only be achieved through supportive government policy.’’